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Tds on software

Mohd Arsalan (Intern) (30 Points)

19 February 2014

Hi, I have a query regarding deduction of TDS on acquisition of software from foreign party.

As per income tax laws I have to deduct TDS @ 195 in case of acquisition of software from outside India.

Now I am facing a problem suppose on Jan 2013 I have purchased the software work Rs. 1 Lac from USA I have paid to the party after deducting TDS on Rs. 1 Lac. After one year it seems that the software doesn't fit for the company's enviornment and now I have contacted the party and raise this issue the party is ready for the replacement with the new software worth Rs. 5 Lac party has said to deduct Rs. 1 Lac which has been paid in Jan 2013 from Rs 5 Lac and make the final payment. Now should I deduct the TDS on Rs. 5 Lac on Rs. 4 Lac u/s 195.

Please reply with any supportive case laws or section or any circular.

Thanks

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CA NITUL MEHTA (KPMG-Senior Consultant-International Tax ) (236 Points)
Replied 20 February 2014

It is as good as change in the terms of the agreement or change in the product delievered. However, the fact remains that TDS on Rs 1 Lac is already deducted and paid and hence you may go ahead and deduct TDS on the rest of Rs 4 Lacs.

However, if you want to be little bit aggresie relying on various delhi high court rulings, there is no need to deduct tax on software payments at the first place unless you are purchasing the copyright of such software itself.