we have imported INCA Engine Calibration System (Hardware parts) for R&D from ETAS GmbH – Germany, now want to import Operating Software with Licence in CD from ETAS GmbH – Germany Further, as informed by Indrnil Sarkar (R&D) this Licence will be for life time, but we will have to pay annual AMC to the ETAS GmbH – Germany in order to get uninterrupted service support and up-gradation time to time .
We seek your opinion is TDS would be deducted on amount to be paid for purchase of :-
1- Soft ware in CD form
2- payment of Annual AMC
Best Regards
Pradeep Jain
Clarification on TDS for foreign software payments and AMC: Deduct under Section 195 as royalty, PAN affects rate. A discussion on a forum addresses the issue of tax deduction at source (TDS) for foreign payments related to software and annual maintenance contracts (AMC) with a German company. The inquiry seeks clarity on TDS applicability for purchasing software on CD and annual AMC payments. Respondents advise that TDS should be deducted under Section 195 of the Income Tax Act, treating software payments as royalty. If the foreign company does not provide a Permanent Account Number (PAN), TDS should be deducted at 20%; otherwise, it is 10%. Additional considerations include Section 115A and Double Taxation Avoidance Agreements (DTAA). (AI Summary)
TaxTMI 
TaxTMI 
