Tds on software license import

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Our Network Sites. India's largest network for Finance Professionals. CCI Menu. Login at CAclubindia. CAclubindia India's largest network for finance professionals. I have enumerated some very commonly used software along with a short explanation to it and they are as follows-. Some other widely used services are — Online software purchase from foreign service provider, hosting service, internet service, software architecture services, software testing services and software project management services provided by Indian service provider and by foreign service provider.

Section C of the Act which deals with the TDS deducted on contracts which also includes service contracts. As per S. But does not include manufacturing or supplying a product according to the requirement or specification of customer by using material purchased from a person, other than that customer. This section will be dealt while calculating TDS on maintenance of not so technical services. In order to know more about technical services we now refer to S. Any individual or an HUF who is responsible for paying to the resident any sum by way of-.

When a developer sells his software outright, he will not claim royalty from it but just the professional fees, but when a customer obtains a licence to use software, the developer will get his due share of royalty. DTAA with various countries have defined royalty in wider terms which even includes the consultancy services pertaining to the technical project.

I have incorporated the pointers for lucid under understanding. As per Section of the Act which deals with payment of royalties and technical fees to non-residents. As regards transfer of payment to a non-resident in consideration of royalty or technical services received, Section of the IT Act provides that —. Any person responsible for paying to a non-resident including a foreign company any sum other than interest on securities and dividends which is chargeable to tax in India is required to deduct tax at source on such income at the time of payment.

Difference may arise on account of Tax Rates and Scope of Taxability. As per the circular dated 13 February , payment by a person hereafter referred to as the transferee for acquisition of software from another person, being a resident, hereafter referred to as the transferor , where-.

The Central Government hereby notifies that no deduction of tax shall be made on the abovementioned payment under of the Act. The assessee submitted that in the light of the judgment in case of John Deere India Pvt. Welspun Corporation Ltd. He had made the aforesaid payments for the acquisition of software licenses, wherein the assessee had acquired copyrighted article and hence, such payments were not taxable as royalty in India, as per DTAA between India and Singapore.

He stated that no requirement to deduct tax out of such payments and hence, the assessee had not defaulted. In relation of tax deduction at source TDS out of training charges paid, he referred to the provisions of section 9 1 vii of the Act pointed out that it refers to managerial services and once it is not covered by DTAA , then it would become business income in the hands of assessee.

He further pointed out that since all these concerns had no Permanent Establishment PE , then there no business income arises in India and in the absence of any PE, there was no question of any taxability under Article 7 of DTAA.