Govt to remove multi-level TDS on software from July

Indian government has decided to remove multi-level TDS system from July 1, giving a major boost to the software industry. In its current form, TDS (Tax Deduction at Source) of 10% is levied at every level of software distribution chain – starting from master distributor to retailer and then to the final consumer.

Given the low margins at which software distributors operate, this is a welcome change that will also boost the consumer software product ecosystem in India.

“Finance Minister Pranab Mukherjee had last week said that Section 194 (J) of the Income Tax Act, 1961, would be amended so as to avoid multi-level TDS on information technology sector.. The abolition multi-level TDS for software companies will be effective from July 1. The law ministry is vetting the final blueprints of the amendments in the I-T Act,” [source].