TDS on Software Payments and Equalization Levy on Online advertisement
Last edited on 25-June-2021
| Paid to | Non-Resident | Resident |
| Payment for
a. online software download (Microsoft office, etc) b. SaaS/cloud service (Atlasian, google apps etc) c. shrink wrapped software (sw in CD/DVD, etc) paid by resident or non residents |
Not Royalty or income chargeable to tax in India – so no TDS u/s 1951 | Royalty – hence TDS u/s 194J @10% if payment exceeds Rs.30,000 p.a. |
| Payment for Online advertisement or space (facebook, google ads, linkedin, etc)
paid by resident or non resident having PE in India |
EL @ 6% if exceeds Rs.1,00,000 p.a | 3Advertisement – hence TDS u/s 194C @2% |
Mode of Payment
There is no difference if the tax is paid after filing 15CA/CB or using credit card. If credit card is used, TDS is to be paid and reimbursement can be obtained from deductee.
| TDS refunds for some specific websites u/s 194J | |
| Google Cloud services | https://cloud.google.com/billing/docs/resources/tds |
| Google Workspace | https://support.google.com/a/answer/7439579?hl=en |
| Microsoft | https://answers.microsoft.com/en-us/msoffice/forum/msoffice_account-mso_other-mso_o365b/tds-deduction-under-section-194j-india-specific/befbb8f2-b52c-4778-8c68-b426c77df35a |
| TDS refunds for some specific websites u/s 194C | |
| https://en-gb.facebook.com/business/help/571983419976170?locale=en_GB | |
| Google Ads | https://support.google.com/google-ads/answer/2375370?hl=en |
1 Supreme Court case for Sec 195
There is no TDS u/s 195 for payment to non-residents for software purchases based on the Supreme Court decision in the lead case of Engineering Analysis Centre Of Excellence Pvt. Ltd [TS-106-SC-2021] dated 2ndMar 2021. For checking applicability of TDS u/s 195, DTAA with respective countries has to be considered2.
2 DTAA countries
The above Supreme Court decision considered the Royalty definition as per DTAA with the below list of countries. For other countries, royalty definition as per DTAA should be compared and checked.
- Commonwealth of Australia
- Canada
- People’s Republic of China
- Republic of Cyprus
- Republic of Finland
- Republic of France
- Federal Republic of Germany
- Hong Kong Special Administrative Region of the People’s Republic of China
- Republic of Ireland
- Republic of Italy
- Japan
- Republic of Korea
- Kingdom of Netherlands
- Republic of Singapore
- Kingdom of Sweden
- India-Taipei Association in Taipei (Taiwan)
- United States of America
- United Kingdom of Great Britain and Northern Ireland
3Advertisement with Facebook/Google – From 2018, Facebook bills from Indian company for any facebook ads. So TDS u/s 194C is applicable and not Equalization Levy. Check whether the bill is issued by Indian company or US company, etc for Facebook USA or Facebook India, google.com or Google India, etc
All reference to section numbers above refers to Income Tax Act, 1961.
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