No more TDS on locally-made software, assures Finance Minister

Sale of locally-made software in the country will no more be subject to tax cuts at various levels, assured the Finance Minister Pranab Mukherjee, on Wednesday, bringing much relief to those associated with the nation’s $5-billion industry, reports The Economic Times.

Reports coming in also clarify that the finance ministry will issue a circular to avoid multi-level taxation on software products. This move will ensure that the current 10 percent tax cut at source, according to Section 194H and Section 194J of the I-T Act applies to every level of the software sale distribution chain will be eased. Domestic companies, like Tata Consultancy Services, Infosys and Tally Systems will be among those who would benefit from this, since this way they wouldn’t have to deal with tax hassles at every level of the sale.

The circular citing no tax cuts, however, will not benefit the multinationals operating in the country, like Microsoft and Adobe, since the income from the sale of the software of these multinationals is counted as royalty payments and the copyright to their software is abroad.