SECTION 197A, READ WITH SECTION 194J of the Income-tax Act, 1961 – Deduction of tax at source – No deduction in certain cases – Specified payment u/s 197A(1F)

Notification No. 21/2012 [F.No.142/10/2012-SO (TPL)] S.O. 1323(e), dated 13-6-2012

In exercise of the powers conferred by sub-section (1F) of section 197A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that no deduction of tax shall be made on the following specified payment under section 194J of the Act, namely:-

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-

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 (i)  the software is acquired in a subsequent transfer and the transferor has transferred the software without any modification,

(ii)  tax has been deducted-

 (a)  under section 194J on payment for any previous transfer of such software; or

 (b)  under section 195 on payment for any previous transfer of such software from a non-resident, and

(iii)  the transferee obtains a declaration from the transferor that the tax has been deducted either under sub-clause (a) or (b) of clause (ii) along with the Permanent Account Number of the transferor.

2. This notification shall come in to force from the 1st day of July, 2012.

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Category : Income Tax (25145)
Type : Notifications (15268) Notifications/Circulars (30276)

0 responses to “TDS on software payments – No deduction in certain cases”

  1. Karan says:

    Yes, First Transfer shall be after Tds

  2. LALIT says:

    Does this mean that wef 01st July 2012, that on very first sale of software or very first transfer of software TDS is applicable? The Circular has mentioned about subsequent Transfer but the wordings are such that first transfer has to be after TDS?
    So on subsequent sale of Software, Service Tax and VAT both are applicable? But TDS is not to be deducted?

  3. Hema says:

    Does this mean that wef 01st July 2012, that on very first sale of software or very first transfer of software TDS is applicable? The Circular has mentioned about subsequent Transfer but the wordings are such that first transfer has to be after TDS?
    What if there is no PAN for NON Resident even on first transfer or there is no PE in India of Non Resident? Still TDS U/s 195 to be deducted? If yes at what Rate? IS this applicable to TDS on Ready to Use Software like Windows 7, Linux etc or only on tailor made Software like ERP packages?
    So on subsequent sale of Software, Service Tax and VAT both are applicable? But TDS is not to be deducted?
    Pl clarify, as this is quite ambiguous to me!

    Thank you

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