Sunday, July 15, 2012

Multi-level TDS on Softwares

Present Tax-structure on sale of softwares
  • Under the current structure, TDS of 10 per cent is levied at every level of software distribution chain from master distributor to retailer and to the final consumer.
  • Problems= Lot of paper work + Low profit margins for the software makers.

TDS Reform for Softwares

  • Now, Finance ministry will do away with the complex multi-level system of Tax Deduction at Source (TDS) for the IT sector from July 1,2012.
  • Pranab said, “No deduction of tax shall be made on payment by a person (transferee) for acquisition of software from another person (transferor), being a resident (of India).
  • Government will amend Income Tax Act for this purpose.

Condition on TDS relief

  • The TDS exemption would be available only when the software is acquired in subsequent transfer, without any modification.
  • This could mean that the benefit of TDS exemption will not be available for unbranded software or customised software.

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