What is TDS?
TDS (Tax Deducted at Source) is a tax collection mechanism in India where businesses are required to deposit a percentage of certain payments directly with the government. TDS falls under the Indian Revenue Service (IRS) and is managed by the Central Board of Direct Taxes (CBDT).
For services like Spur (a SaaS platform), the applicable TDS rate is 2% under Section 194J(a) for "technical services".
What TDS Rate Applies to Spur?
The correct TDS rate for Spur services is 2% under Section 194J(a) of the Income Tax Act.
Spur is a SaaS (Software as a Service) platform, which is classified as a technical service. Technical services fall under Section 194J(a), which has a TDS rate of 2%.
Category | Section | TDS Rate | Applies to Spur? |
Technical Services | 194J(a) | 2% | ✅ Yes |
Professional Services | 194J(b) | 10% | ❌ No |
Why 2% and Not 10%?
Some businesses mistakenly believe the TDS rate for Spur should be 10%. This confusion arises because Section 194J has two different rates:
Section 194J(a): Technical Services – 2% TDS
Applies to:
Software as a Service (SaaS)
IT services
Technical consultancy
Cloud platforms
Spur falls under this category because it is a packaged SaaS product.
Section 194J(b): Professional Services – 10% TDS
Applies to:
Legal services
Accounting services
Medical consultation
Architectural services
Interior decoration
Spur is not a professional service. It is a technical service.
How Other SaaS Companies Handle TDS
Major SaaS companies like Microsoft also clarify that their services fall under technical services (2% TDS), not professional services.
Example: Microsoft 365
When asked about the TDS rate for Microsoft 365 Business Standard subscriptions, Microsoft's official response stated:
"Microsoft 365 is a packaged software/SaaS product, which falls under technical services under Section 194J(a). Therefore, the applicable TDS rate is 2%, not 10%."
Source: Microsoft Q&A on TDS Rate
Spur follows the same classification as Microsoft and other SaaS platforms.
HSN Code for Spur Services
When filing TDS and tax returns, you'll need to mention the HSN (Harmonized System of Nomenclature) code for Spur services.
HSN Code for Spur: 997331
This is the standard HSN code for SaaS and cloud-based services in India.
How TDS Works with Spur's Billing System
Spur uses Stripe for billing, which does not automatically deduct TDS on recurring transactions. This means you'll need to handle TDS compliance manually using the following process.
Step-by-Step: How to Handle TDS for Spur Payments
Step 1: Pay the Full Invoice Amount to Spur
When you receive your Spur invoice, pay 100% of the invoice amount to Spur via Stripe.
Example:
Spur Invoice: ₹10,000
Amount You Pay to Spur: ₹10,000 (full amount)
Why pay the full amount?
Stripe's billing system doesn't support automatic TDS deduction for recurring subscriptions, so we use a credit note process to handle TDS compliance.
Step 2: Calculate 2% TDS
After paying Spur, calculate 2% TDS on the invoice amount.
Formula:
TDS Amount = Invoice Amount × 2%
Example:
₹10,000 × 2% = ₹200
Step 3: Deposit TDS with the Government
Deposit the TDS amount with the government using Form 26QB through the Income Tax Department's online portal.
How to deposit TDS online:
Visit the Income Tax portal
Select Form 26QB (for non-salary TDS payments)
Enter the following details:
PAN of Deductor: Your company's PAN
PAN of Deductee: Spur's PAN (request from [email protected] if needed)
Amount: TDS amount (e.g., ₹200)
Section: 194J (Technical Services)
Generate Challan 281 and complete the payment
Download the TDS certificate (Form 16A) after payment is processed
Important: Make sure to use the correct section code (194J) and HSN code (997331) when filing.
Step 4: Submit TDS Certificate to Spur
After depositing TDS with the government, email your TDS certificate (Form 16A) to [email protected] with the following details:
Invoice number
TDS amount deposited
TDS payment date
Challan details
Copy of Form 16A
Subject Line Example:
"TDS Certificate Submission – Invoice #12345"
Step 5: Spur Verifies and Issues a Credit Note
Once we receive your TDS certificate, Spur will:
Verify the TDS details on the Income Tax portal
Issue a credit note for the TDS amount you deposited (2% of the invoice)
This credit note will be:
Applied to your next invoice (reducing the amount due), OR
Refunded to your account if you prefer
Step 6: Credit Applied to Your Account
The credit note will automatically reduce your next invoice amount.
Example:
Description | Amount |
Spur Invoice (Month 1) | ₹10,000 |
Amount You Paid to Spur | ₹10,000 |
TDS @ 2% (deposited with govt) | ₹200 |
Credit Note Issued by Spur | ₹200 |
Next Invoice (Month 2) | ₹10,000 - ₹200 = ₹9,800 |
Complete Example: TDS Process for Spur
Let's walk through a full example:
Month 1:
You receive a Spur invoice for ₹10,000
You pay ₹10,000 to Spur via Stripe
You calculate TDS: ₹10,000 × 2% = ₹200
You deposit ₹200 with the government using Form 26QB
You download Form 16A and email it to [email protected]
Spur verifies and issues a ₹200 credit note
Month 2:
Your next Spur invoice is ₹10,000
The ₹200 credit is applied automatically
You only pay ₹9,800 to Spur
You repeat the TDS process (deposit ₹196 with the government for the ₹9,800 payment)
Why Does Spur Use This Process?
Stripe's recurring billing system is designed for automatic payments and doesn't have built-in TDS deduction functionality. To comply with Indian tax laws while using Stripe, we follow this credit note process to ensure:
✅ You remain compliant with TDS requirements
✅ Spur can claim the TDS credit from the government
✅ You don't overpay for your subscription
✅ The process is seamless and doesn't disrupt your billing cycle
Important Notes
✅ TDS is mandatory for Indian businesses making payments above ₹30,000 per year to Spur.
✅ Always submit your TDS certificate to [email protected] within 15 days of depositing TDS with the government. This helps us process your credit note faster.
✅ Use the correct HSN code (997331) when filing TDS returns to avoid discrepancies.
✅ TDS applies to the total invoice amount, including GST.
✅ Keep copies of all TDS certificates for your records and for reconciliation during audits.
Frequently Asked Questions
Q: Is TDS applicable on all Spur invoices?
A: TDS is applicable if your total payments to Spur in a financial year exceed ₹30,000. If your annual subscription is below this threshold, TDS may not be required. Consult your Chartered Accountant (CA) for confirmation.
Q: Can I deduct TDS before paying Spur?
A: No. Because Spur uses Stripe for billing (which doesn't support TDS deduction), you must pay the full invoice amount to Spur first, then deposit TDS separately with the government, and then receive a credit from Spur.
Q: What if I deduct TDS at 10% instead of 2%?
A: Please don't. Spur is classified as a technical service under Section 194J(a), which mandates a 2% TDS rate. Deducting 10% would be incorrect and may cause reconciliation issues. If your CA insists on 10%, share this article and the Microsoft TDS clarification with them.
Q: What HSN code should I use for Spur services?
A: Use HSN code 997331 for SaaS and cloud-based services.
Q: Do I need to provide a TDS certificate to Spur?
A: Yes. After depositing TDS with the government, download Form 16A from the Income Tax portal and email it to [email protected] Without this certificate, we cannot issue a credit note.
Q: How long does it take to receive the credit note?
A: Once we receive your TDS certificate, we typically process credit notes within 5-7 business days. The credit will be applied to your next invoice automatically.
Q: What if I forget to deposit TDS?
A: If you forget to deposit TDS at the time of payment, you are still required to deposit it with the government and file the TDS return. You may also be liable for interest and penalties. Consult your CA immediately if this happens.
Q: Does TDS apply to GST as well?
A: Yes. TDS is calculated on the total invoice amount, including GST.
Example:
Invoice Amount (before GST): ₹8,475
GST @ 18%: ₹1,525
Total Invoice Amount: ₹10,000
TDS @ 2% on ₹10,000 = ₹200
Q: Can I pay Spur in installments and adjust TDS later?
A: No. You must pay the full invoice amount to Spur via Stripe, then handle TDS separately with the government. There's no option to adjust TDS at the time of payment through Stripe.
Q: What if my CA says Spur should be 10% TDS?
A: Politely share this article and the Microsoft TDS clarification with your CA. If they still insist, contact us at [email protected] and we'll provide formal documentation to resolve the confusion.
Q: What if I pay via credit card or other online payment methods?
A: The TDS process remains the same regardless of payment method. Even if you pay via credit card through Stripe, you must deposit TDS separately with the government and submit the certificate to Spur.
Q: Can I get a refund instead of a credit note?
A: Yes. If you prefer a refund instead of having the credit applied to your next invoice, mention this in your email when submitting the TDS certificate to [email protected]. Refunds are processed within 7-10 business days.
Q: What is Spur's PAN number for TDS filing?
A: If you need Spur's PAN number for filing TDS, please email [email protected] and we'll provide it.
Summary
Item | Details |
TDS Rate | 2% |
Applicable Section | Section 194J(a) – Technical Services |
HSN Code | 997331 |
TDS Threshold | ₹30,000 per financial year |
Payment Process | Pay 100% to Spur → Deposit 2% TDS to govt → Submit TDS certificate → Receive credit from Spur |
TDS Certificate | Form 16A (to be shared with [email protected]) |
TDS Deposit Form | Form 26QB |
Credit Note Timeline | 5-7 business days after TDS certificate submission |
If you have questions about TDS deduction or need a formal letter for your finance team, contact us at: [email protected] or on WhatsApp. (for TDS certificates and payment reconciliation)
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