TDS on software license

[Asked by Guest]

Dear Sir,
Your  reference  is given by NIRC team

Please guide us under which section TDS to be deducted   & what rate (under Income Tax Act)

Transaction details are:-

1.       Buyer(our co.)  is corporate entity (Ltd. Co.) registered in India.
2.       Purchasing 200 Original License of Micro soft (Only License).
3.       Supplier is dealer of Microsoft at Delhi Location. Supplier is Corporate entity (Pvt. Ltd.) registered in India.
4.       Supplier is charging 5% VAT & 10.3% Service Tax in the quotation.
 
Waiting for your valuable guidance.

[Anuj Gupta]

TDS on software is a problematic situation at present.

In my view you can be better off by deucting TDS @ 10% under section 194J. There is a recent delhi High Court decision in Dynamic Vertical Software India P.Ltd which has held that "What is found, as a matter of fact, is that the assessee has been purchasing the software from Microsoft and sold it further in Indian market"

So if you have purchased software and sold it further in the Indian Market then there shall be no liabillity of TDS. So kindly check whether the facts of the case fit in your case.

 Anuj

AI Summary

TDS on software licenses: consider deduction under section 194J; resale after purchase may negate withholding per precedent.
TDS on payments for software licences depends on whether the payment is a taxable fee or a purchase for resale; where the facts show acquisition and subsequent resale in the domestic market, withholding may not be required, whereas absent resale characterisation a purchaser may deduct tax under section 194J on payments that constitute fees for services.