When an Indian company pays a Singapore-based company for software licenses, TDS must be deducted — but the rate and classification depend on whether the payment qualifies as Royalty under the India-Singapore DTAA or Section 195 of the Income Tax Act. Under Section 115A, TDS on royalty to non-residents is 20% + Surcharge + Cess. Under the India-Singapore DTAA, the applicable rate for royalty is 10% — but only if the Singapore company submits a valid TRC, Form 10F, No PE Declaration, and has a PAN in India. This applies to Indian businesses making cross-border software payments, IT companies, and subsidiaries paying their foreign parent.

• Section 115A rate: 20% + Surcharge + Cess
• India-Singapore DTAA rate: 10% (if compliant)
• Key documents required: TRC, Form 10F, No PE Declaration, PAN, Income Tax Login, DSC of authorised foreign signatory

Is Software License Payment a Royalty?

This is the core question Indian payers must resolve before deducting TDS. The answer has evolved significantly through court rulings and legislative amendments.

Under Section 9(1)(vi) of the Direct Tax Code 2025 (and historically under the Income Tax Act, 1961), "Royalty" includes any consideration for the use of, or the right to use, any patent, invention, model, design, secret formula, trademark, or similar property — including the transfer of all or any rights in respect of any copyright of a literary, artistic, or scientific work.

Software, being a copyrighted work, often falls within this definition. However, courts in India have drawn a distinction:

• Shrink-wrap / off-the-shelf software: Where a customer buys a standard software license for personal or business use, courts have held it is NOT royalty — it is a purchase of a product.
• Custom software / source code access / right to reproduce: Where the purchaser gets rights to reproduce, sub-license, or access underlying IP, payments are treated as royalty.

This distinction is critical. Indian tax authorities have frequently sought to classify all software payments as royalty to impose TDS obligations. The Supreme Court of India, in landmark rulings, has held that payments for off-the-shelf software are not royalty — but the Income Tax Department has amended Section 9(1)(vi) to broaden the definition, keeping this a live dispute in many cases.

TDS Rules: India-Singapore DTAA vs. Section 115A

Once a payment is classified as royalty, you must determine which rate applies — the domestic rate under Section 115A or the DTAA rate under the India-Singapore tax treaty.

Provision	Applicable Rate	Conditions
Section 115A (Domestic Law)	20% + Surcharge + Cess	No DTAA compliance needed
India-Singapore DTAA (Article 12)	10%	TRC, Form 10F, No PE Declaration, PAN, DSC of foreign signatory, Income Tax Login

A taxpayer is entitled to choose whichever provision is more beneficial. In most cases, the DTAA rate of 10% is lower — but only if all compliance documents are in place before the payment is made.

DTAA Benefits: What Singapore Companies Must Submit

For the Singapore company to claim the lower 10% DTAA rate, the following documents are mandatory. The Indian payer is responsible for collecting these before making the payment and deducting TDS.

1. Tax Residency Certificate (TRC)

Issued by the tax authority of Singapore (IRAS), the TRC confirms the Singapore company is a tax resident of Singapore. This is the foundational document for any DTAA claim.

2. Form 10F

This is a self-declaration form filed by the non-resident payee on the Indian Income Tax portal. It supplements the TRC with information like address, PAN, and period of residence. Filing Form 10F on the Income Tax portal requires the Singapore company to first obtain a PAN card in India and set up an Income Tax login.

3. No Permanent Establishment (No PE) Declaration

The Singapore company must declare that it does not have a Permanent Establishment (PE) in India. If the company has a PE in India, the royalty income would be taxable as business income in India at normal rates, not as royalty under the DTAA. This changes the TDS obligation significantly.

4. PAN Card and Income Tax Login

The Singapore company must apply for a PAN in India. This is required to create an Income Tax login, which in turn is needed to file Form 10F and, if applicable, to file an Income Tax Return (ITR) in India. If the Singapore company claims DTAA benefit, it is required to file an ITR in India.

5. DSC of Authorised Foreign Signatory

A Digital Signature Certificate (DSC) of the authorised signatory of the Singapore company is required to digitally sign and file returns and forms on the Indian Income Tax portal. Note: A regular DSC of an Indian director or partner will not work. This must be the DSC of the foreign individual authorised to sign on behalf of the company.

To obtain the DSC for a foreign signatory, the following are required:

• Email and phone OTP from the foreign individual
• Video verification of the foreign individual
• Address proof (driving licence or equivalent)
• Passport copy and photograph

What If Software Payment Is NOT Royalty?

If the software license payment is classified as business income (not royalty), then under the India-Singapore DTAA, business income is taxable in India only if the Singapore company has a PE in India. If there is no PE, the payment is not taxable in India at all, and accordingly, TDS is not required to be deducted under Section 195.

This is why the classification debate matters: if the payer classifies it as non-royalty business income and no PE exists, TDS is nil. If the tax authority later reclassifies it as royalty, the payer faces TDS default, interest, and penalty exposure.

To protect against this risk, many Indian companies take a conservative approach and deduct TDS at the applicable rate, then file for a lower withholding certificate or allow the Singapore company to claim a refund.

Section 115A: When Does It Apply?

Section 115A of the Direct Tax Code 2025 applies when a foreign company earns royalty or fees for technical services (FTS) from India. The rate under Section 115A is 20% + applicable Surcharge + Health and Education Cess.

If the Singapore company does not wish to provide all the DTAA compliance documents — or if it does not have a PAN in India — the Indian payer must deduct TDS at the Section 115A rate.

Importantly, if a foreign company pays tax at the Section 115A rate on royalty or FTS, it is not required to file an ITR in India for that income. However, if DTAA benefit is claimed, ITR filing becomes mandatory.

Step-by-Step Compliance for Indian Payers (2026)

1. Classify the payment: Determine whether the software license payment qualifies as royalty, FTS, or business income under the India-Singapore DTAA and the Direct Tax Code 2025.
2. Collect DTAA documents: If claiming 10% DTAA rate, collect TRC, Form 10F, No PE Declaration, and confirm the Singapore company has an Indian PAN.
3. Deduct TDS before payment: Deduct TDS at 10% (DTAA) or 20% + surcharge + cess (Section 115A) before remitting to Singapore.
4. Deposit TDS with government: Deposit the deducted TDS with the Indian government by the 7th of the following month.
5. File TDS return (Form 27Q): File the quarterly TDS return for payments to non-residents using Form 27Q.
6. Issue TDS certificate (Form 16A): Provide the Singapore company with Form 16A as proof of TDS deduction.
7. Maintain documentation: Retain all DTAA compliance documents for at least 8 years for audit purposes.

Common Mistakes Indian Companies Make

• Not collecting DTAA documents before payment: Documents must be in place before the remittance — not after. Retroactive collection does not cure TDS default.
• Assuming all software payments are royalty: Misclassification in either direction creates risk. Proper legal analysis is essential.
• Using domestic director's DSC instead of foreign signatory's DSC: This is a common error when helping Singapore companies set up their India compliance. Only the authorised foreign signatory's DSC is valid.
• Not filing Form 27Q: Even if TDS is deducted correctly, failure to file the quarterly TDS return results in penalties and interest.
• Ignoring the ITR filing obligation of the Singapore company: If the Singapore company claims DTAA benefit, it must file an ITR in India. Failure to do so can result in denial of DTAA benefits in scrutiny proceedings.

How Taxocity Helps with Cross-Border TDS Compliance

Taxocity has been helping Indian businesses manage cross-border tax compliance for over three decades. Our experts handle the full spectrum of DTAA compliance — from classifying software payments correctly to obtaining DSCs for foreign signatories and filing Form 27Q on time.

Our services include:

• Classifying software license payments as royalty, FTS, or business income
• Assisting Singapore companies in obtaining PAN, setting up Income Tax login, and filing Form 10F
• Obtaining DSC for foreign signatories (email OTP, video verification, address proof)
• Filing TDS returns (Form 27Q) and issuing Form 16A certificates
• Filing ITR in India for foreign companies claiming DTAA benefits
• Representing clients before the Income Tax Department in case of notices or disputes

With a 4.8/5 rating from 5,000+ clients and a 100% compliance guarantee, our team of real human experts ensures your international transactions are structured correctly from day one. Explore our GST Registration and TDS on Royalty Payments to Non-Residents resources for additional guidance.

Also see our detailed guides on Form 10F compliance for other DTAA countries: Form 10F for India-Singapore DTAA.

Key Takeaways

1. Software license payments to Singapore companies may or may not be royalty — the classification depends on the nature of rights transferred.
2. If classified as royalty, TDS applies at 20% + surcharge + cess under Section 115A, or 10% under the India-Singapore DTAA.
3. To claim the 10% DTAA rate, the Singapore company must provide TRC, Form 10F, No PE Declaration, PAN, Income Tax login, and DSC of the authorised foreign signatory.
4. If DTAA benefit is claimed, the Singapore company must file an ITR in India.
5. The Indian payer must file Form 27Q and issue Form 16A irrespective of the rate applied.

Sources

• Taxocity — Form 10F Requirement: Royalty Payment, Singapore-India DTAA
• Taxocity — TDS on Royalty Payments to Non-Residents, India

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Disclaimer: This article is for informational purposes only and does not constitute tax advice. Laws and DTAA provisions are subject to change. Please consult a qualified tax advisor before making any decisions regarding TDS deduction, DTAA compliance, or cross-border payments.