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New Notification
The Indian Government has issued a notification on 13 June 2012 (“Notification”),





pursuant to which tax will no longer be deducted on multi-level software payments made
to a resident, subject to certain conditions discussed below. The new provision will come
into force from 1 July 2012.
Background & Budget 2012
The Indian tax laws,Pandora UK, until recently, were capable of varying interpretations on
characterization of income from software payments in view of the conflicting decisions
of the various courts on whether or not payment for use of software is royalty.
The Finance Act, 2012 clarified the above issues by inserting explanations to section
9(i)(vi) of the Income Tax Act,Pandora Charms, 1961 (“IT Act”) with retrospective effect from June 1,
1976 stating that the consideration for use or right to use of computer software is royalty,Christian Louboutin Outlet UK.
Although, the Finance Act,Cheap Louis Vuitton Handbags, 2012 cleared the ambiguities surrounding the characterization
of software payments, under the extant provisions,Pandora Charms Sale, withholding tax on royalty payments
is applicable at the rate of 10% without any exceptions,Louis Vuitton UK. In case of multi level software
distribution,Pandora Beads Sale, this would mean that the withholding tax would be applicable at every level
of the software distribution chain for e,Cheap UGG Boots.g from a non-resident software owner to a
resident distributor, from a resident distributor to the resident retailer and finally to the
end consumer,Louis Vuitton Outlet UK, resulting in multi-level taxation on such payments.
The Government has pursuant to the powers given under section 197A (IF) notified that
tax is not required to be deducted at each level for acquisition of software if the
stipulated conditions are complied with,MBT Shoes UK.
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