How to file TDS returns for payments to software developers?

Posted In | Finance | Accounting Software | India Accounting Tax

Tax Deducted at Source (TDS) is one of the ways by which the Government of India collects tax. It is applicable to various incomes such as salary, interest, commission, rent etc. One of such incomes that fall under TDS is payments made to software developers. This article aims to guide you on how to file TDS returns on payments made to software developers.

 

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Understanding TDS on Professional Services

TDS on professional services is deducted under section 194J of the Income Tax Act. Payments made to software developers fall under this category. The current rate of TDS under this section is 10%. However, if the payee does not provide their PAN, the rate becomes 20%.

 

Steps to File TDS Returns on Payments to Software Developers
 

Step 1: Collecting Information

Before you start the process of filing TDS returns, gather all the necessary information. This includes the PAN of the software developer, amount paid, TDS deducted and deposited, and the date of payment and deposit.
 

Step 2: Filing TDS Return

You can file TDS returns physically at TIN Facilitation Centers or online on the NSDL website. To file online, register on the NSDL website and choose the form applicable to you (Form 24Q for salaries and Form 26Q for all other payments). Input all the relevant details, validate the details, and submit the form.
 

Step 3: Payment of TDS

Payment of TDS can be made online through the Challan No./ITNS 281 on the Tax Information Network’s website. Make sure to fill all relevant details accurately.
 

Step 4: TDS Return Verification

After the successful submission of the form and payment of TDS, a Form 27A is generated. This form is a summary of the TDS return, which needs to be verified and submitted.
 

Step 5: Issuing TDS Certificate

After completing the TDS return filing process, it is mandatory to issue a TDS certificate to the software developer. This certificate is the proof of deduction of tax.

 

Following these steps will ensure you comply with the tax laws while making payments to software developers. It is always advisable to be aware of the latest tax rates and provisions and to consult with a tax professional when in doubt.