Tds On Annual Subscription License Fee For Software

Basheer PM
watch_later 3 years, 3 months ago

We have purchased a 1year subscription for a CRM Software. The vendor has raised an invoice mentioning "Annual Subscription License Fee for 4 users, start date... and end date..... , SAC: 997331, also charged IGST @18%

My Query is should we deduct TDS while making payment to the Vendor ?. Please advice

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1 Answer

GST Payer watch_later 3 years, 3 months ago

Income tax under section 194C is deducted (TDS) when there is any contract for provision of service and 194J which is for technical services.

In case of sale or purchase of software both these conditions are not meet and hence there is no liability to deduct tax.

But as you mentioned the contract is for annual subscription this amount to contract as well as technical services and TDS is liable to be deducted at 1% or 2% depending on status of supplier.

If it is only a purchase of software like tally then there is no need to deduct TDS.

To be more specific this is still debatable, CBDT has clarified that there is no need to deduct tax on purchase of software and similar order was passed by Madras high court.

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