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.