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.
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.
IMPORTANT: Since the process is manual and requires bandwidth from both the Spur team and from the client's team, we only allow this for clients on the annual plan. That way, this only needs to be done once a year.
If you are not on annual plan and need to avail TDS, please contact our Sales team about switching to an annual plan first.
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 Charges: ₹10,000
GST on Spur Charges: 18% = ₹1,800
Amount You Pay to Spur (Invoice Amount): ₹11,800 (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.
Note that the TDS amount does not include GST - GST is separate and excluded from this entire process.
Formula:
TDS Amount = Invoice Amount × 2%
Example:
₹10,000 × 2% = ₹200
Note that even if the invoice amount was ₹11,800 (including GST) in our example, TDS is calculated after excluding GST (₹1,800 is therefore subtracted).
Step 3: Deposit TDS with the Government
Deposit the TDS amount with the government using Form 26Q through the Income Tax Department's online portal. This has to be done within the same quarter as the one in which the invoice was raised.
If any information (like Spur's PAN) are needed for this process, please reach out to [email protected]
Important: Make sure to use the correct section code (194J) 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 the first or second invoice of your next quarter (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.
For invoices paid between January to March, Spur can take upto 60 days from the end of the quarter to issue credit note.
For invoices paid in all other months, Spur can take upto 30 days from the end of the quarter to issue the credit note.
Example:
Description | Amount |
Spur Charges (Monthly) | ₹10,000 |
Spur Charges (Quarter 1) | ₹30,000 |
Amount You Paid to Spur | ₹35,400 (including 18% GST) |
TDS @ 2% (deposited with govt) | ₹600 |
Credit Note Issued by Spur | ₹600 |
Next Invoice | ₹10,000 - ₹600 = ₹9,400 |
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
✅ 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.
✅ TDS does not apply on GST or any other taxes paid on top of Spur charges..
✅ 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 you pay Spur 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: 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 30 days (60 days if the invoice was paid between January to March). 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: No. TDS is calculated only on the Spur's charges, excluding GST.
Example:
Invoice Amount (before GST): ₹10,000
GST @ 18%: ₹1,800
Total Invoice Amount: ₹11,800
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 30 days (60 days if the invoice was raised between January to March).
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 |
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 26Q |
Credit Note Timeline | Within 30 days of TDS certificate submission (60 days if the invoice was raised between January to March) |
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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