Tds on software

[Rajiv Sinha]

Dear Sir Pls clear deduction of Tds on software purchase 0r development as per custmer specification. Regards, Rajiv sinha

[Rama Krishana]

Since there is specific judgment of Karantka high court addressing the similar issue, you are advised to study that decision - (2009 - TMI - 35016 - High Court of Karnataka) - As per the decision, it appears that this activity would be liable for TDS since purchase of software would include licence.

[Anuj Gupta]

Dept. will try to disallow the expenditure in both the situations . So practically if you have strength to fight the cases then my opinions are as follows: TDS should not be applicable in case of software purchase whereas it shall be taxable if the development is as per the customer specification.

AI Summary

TDS on software transactions: purchase with licence treated as subject to withholding; bespoke development treated as taxable service.
TDS applicability on software depends on transaction character: purchase that includes a software licence is treated as subject to withholding per a Karnataka High Court decision, whereas development supplied to customer specification is treated as taxable service with withholding implications; authorities may attempt to disallow expenditure in either case, so classification determines withholding obligations and litigation risk.