Is Form 15CA required for payment to a foreign software company from India?

Last updated 3 August 2026

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A Gurugram fintech startup was paying $2,800 per month to a US-based development agency for ongoing mobile app customisation. In the fifth month, the cumulative total crossed Rs 10 lakhs. When they initiated the sixth payment through HDFC, the international payments team asked for 15CA and 15CB (now Form 145 and Form 146 respectively). The finance team had never dealt with these forms. The CA they engaged needed three days to review the contract because it described the work as both software development and technical consulting. The payment was delayed. The development work also stopped because the contractor paused on non-payment.

Software payments are one of the most frequently misclassified categories in Indian cross-border payments, and the stakes are real.

Under Section 9(1)(vi) of the Income Tax Act, royalties payable to non-residents are deemed to accrue or arise in India and are taxable. Explanation 2 to Section 9(1)(vi) defines royalty broadly and explicitly includes consideration for the use of, or the right to use, any computer software. Under this provision, software license payments have historically been treated as royalties by the Income Tax department, attracting TDS at 10 percent on the gross amount.

The Supreme Court of India addressed this in Engineering Analysis Centre of Excellence Private Limited versus the Commissioner of Income Tax (2021). The Court held that payments for off-the-shelf or packaged software, where the buyer acquires only the right to use the software as a consumer and not any copyright in the software itself, are not royalties. TDS is not required under Section 195 for such payments. This judgment significantly changed the landscape for shrink-wrap software purchases and direct downloads.

However, the Supreme Court's judgment does not resolve all software payment questions. It applies clearly to off-the-shelf software where no customisation is involved. Custom software development, where the foreign agency builds software to the Indian company's specifications, remains FTS under Section 9(1)(vii) and attracts TDS at 10 percent. Software licenses bundled with implementation, support, and customisation services are also characterised as FTS in most cases.

SaaS subscriptions present a separate analysis. When an Indian company subscribes to Salesforce, Figma, Notion, or similar cloud-based services, the Indian company does not acquire any software or license. It accesses a service remotely. The income earned by the foreign company from such subscriptions is increasingly treated as business income, not FTS or royalty, particularly when the service is standardised and the Indian subscriber has no control over the underlying technology. This position has support from CBDT circulars and several ITAT decisions, though it is not uniform across all platforms.

Cloud infrastructure payments to AWS, Microsoft Azure, or Google Cloud are treated similarly to SaaS by many CAs, on the basis that the Indian company is purchasing compute capacity and not a software license. The exposure here is that the Income Tax department has challenged this position in large assessments.

For businesses managing multiple foreign software vendor relationships, the cumulative tracking issue is critical. A common pattern: five foreign SaaS tools each costing Rs 80,000 per year, individually below the threshold, but totalling Rs 4 lakhs. A new development agency added mid-year brings the annual foreign software spend to Rs 7 lakhs. The bank asks for 15CA documentation on the development agency payment but the underlying cumulative exposure across all vendors has never been tracked.

Maintain a foreign payment register by vendor, purpose, amount, and date. When any individual vendor relationship is projected to exceed Rs 4 lakhs in a year, engage a CA to take a written TDS position for that vendor before the next payment. This produces a defensible audit trail and prevents the scramble that happens when the bank asks for documentation retroactively.

Note: Rates and thresholds mentioned are as of FY 2024-25. Always verify current figures before acting.

This article is for general information only. For your specific remittance, consult a practicing CA.