Govt. Cuts Multi-level TDS for Software Cos

Coming as a breather of domestic software industry, finance minister Pranab Mukherjee assured that sale of locally made software will not be subjected to tax deduction at multiple levels.

"I have approved issuance of a circular to avoid multi-level TDS on software under Section 194 J (of the Income-Tax Act) on the advice of Nasscom," Mukherjee said on the sidelines of an event in New Delhi. The move will replace a multi-level structure of TDS on distributors with a single TDS. This would be deducted by the first distributor who directly purchases packaged software from a developer.

It would also help domestic companies including Tata Consultancy Services, Infosys, and Tally Solutions as they will do away with tax hassles they face at every level of the sales chain.

The move was also welcomed by Nasscom that said the move will benefit the IT sector and improve finances. "TDS deduction was leading to cash flow issues for the dealers as well as increase in cost of software as dealers could not afford funds getting locked in for long durations," Nasscom said.

Nasscom president Som Mittal said the announcement will help alleviate industry's concerns on the issue.