File Validation Utility 3.6 is released on September 25, 2012, and takes effect from October 16, 2012.
According to the CBDT Notification 21/2012 that is dated on July 1, 2012, the sales of computer software involves a channel (for example, the channel from developer to distributor to dealer to end-user). To avoid tax deduction at several levels, CBDT issued the Notification 21/2012.
According to the notification, the tax deduction at source (TDS) does not apply on the acquisition of software from another person, being a resident.
Therefore, transactions will have a NIL/Zero deduction of TDS, when the following conditions are true:
- The software is obtained in a successive transfer.
- The transferor transfers the software without any modification.
- The TDS is deducted under the 194J section or the 195 section of the Income tax Act, 1961 (Act) on the payment of the previous transfer of the software.
In this situation, the transactions will be flagged with "S" in the "Reason for NIL/Lower Deduction" column in the 26Q and 27Q statement reports, in order to state that the transactions are software-related transactions. Additionally, the "S" flag will also be inserted in the record of the transaction lines in the e-file that is generated for the statement.