How To Deduct TDS & VDS from Information Technology Enabled Services?

Information Technology enabled services (ITeS) are one of the most powerful online services in 21^st century. It wants to attain all degree of user. Day by day worldwide economy will become more and more service-orientated. Information Technology offers variety of services. In addition, IT permits the development of latest services formerly untouched in various fields. Today, ITeS has been extra than outsourcing services due to the catalyzing aspect of Internet technology. In Bangladesh its popularity increases tremendously. Passionately a large portion of us earn money from Information Technology enabled service. The Bangladeshi Government provide huge facility on these services & announce its income tax exempted from the first day of July, 2008 to the thirtieth day of June, 2024 subject to some condition. Due to lack of proper knowledge about TDS & VDS, Corporate companies as well as individual suffer losses on this sector.

Here the question is What is meant by information technology enabled service? What is the information technology enabled services? How to deduct VDS from information technology enabled services? How to deduct TDS from information technology enabled services? Which services are exempted from information technology enabled services? In case of information technology enabled services if there is no tax exemption certificate, tax will be deducted or not?

I will help you answer all these question in this post. You’ll get proper information along with reference, even you’re a beginner just follow utilize this & boost your knowledge & productivity. This post covering finance act 2021.  Let’s start.

List of Content

1. What is meant by information technology enabled service?

2. What are the information technology enabled services?

3. How to deduct VDS from information technology enabled services?

4. How to deduct TDS from information technology enabled services?

5. Which services are exempted from information technology enabled services?

6. In case of information technology enabled services if there is no tax exemption certificate, tax will be deducted or not?

1. What is meant by information technology enabled service?

Information technology enabled services are all activities that utilize information technology to improve the efficiency of an organization. IT enabled Services, referred to as internet enabled offerings or far off services or Tele-running, covers the whole gamut of operations which make proper usage of the technology for improving performance of a company.

These services provide an extensive range of profession alternatives that encompass opportunities in name Centre, clinical transcription, scientific billing, and coding, again office operations, sales claims processing, legal databases, content improvement, payrolls, logistics control, GIS (Geographical Information System), HR services, internet services and many others.

2. What are the information technology enabled services?

1. Digital Content Development and Management

2. Animation (Both 2D & 3D),

3. Geographic Information Services (GIS),

4. IT Support and Software Maintenance Service

5. Software Development & Customization,

6. Website Development and Services,

7. Website Hosting,

8. Digital Data Analytics,

9. Business Process Outsourcing,

10. Data Entry,

11. Data Processing,

12. Call Center,

13. Digital Graphic Design & Computer Aided Design,

14. Search Engine Optimization,

15. Web Listing,

16. Document Conversion,

17. Imaging & Archiving,

18. Overseas Medical Transcription,

19. Cyber Security Services,

20. E-Learning,

21. E-book,

22. E-Procurement and E-Auction.

3. How to deduct VDS from information technology enabled services?

Answer

Example-1

ABC Company Limited received IT Support & Software Maintenance Service (ITES) from RICO IT SOLUTION LTD. Taka. 315,000(inclusive of VAT). Here’s how to calculate and deduct VAT from this bill.

• Information Technology Enabled Services i.e., IT Support & Software Maintenance Service (ITES) for taka 315,000(inclusive of VAT) has been received here.

• VDS on Information Technology Enabled Services is 5%.

• VDS on IT Support & Software Maintenance Service (ITES) 315,000 x 5/105 = tk. 15,000 to be deducted.

4. How to deduct TDS from information technology enabled services?

Answer

Example-2 (Where base amount does not exceed tk. 25 lakh)

ABC Company Limited received IT Support & Software Maintenance Service (ITES) from RICO IT SOLUTION LTD. Taka. 315,000(inclusive of VAT). Here’s how to calculate and deduct Tax from this bill.

1. Information Technology Enabled Services i.e., IT Support & Software Maintenance Service (ITES) for taka 315,000(inclusive of VAT) has been received here.

• VDS on Information Technology Enabled Services is 5%.

• VDS on IT Support & Software Maintenance Service (ITES) 315,000 x 5/105 = tk. 15,000 to be deducted.

• Base value of this bill (315,000-15,000) = Tk. 300,000.

• TDS on IT Support & Software Maintenance Service (ITES) 300,000 x 10% = tk. 30,000 to be deducted.

Example-3 (Where base amount exceeds tk. 25 lakh)

ABC Company Limited received IT Support & Software Maintenance Service (ITES) from RICO IT SOLUTION LTD. Taka. 3,150,000(inclusive of VAT). Here’s how to calculate and deduct Tax from this bill.

1. Information Technology Enabled Services i.e., IT Support & Software Maintenance Service (ITES) for taka 3,150,000(inclusive of VAT) has been received here.

• VDS on Information Technology Enabled Services is 5%.

• VDS on IT Support & Software Maintenance Service (ITES) 3,150,000 x 5/105 = tk. 150,000 to be deducted.

• Base value of this bill (3,150,000-150,000) = Tk. 3,000,000.

• TDS on IT Support & Software Maintenance Service (ITES) 3,000,000 x 10% = tk. 300,000 to be deducted.

5. Which services are exempted from information technology enabled services?

Answer

Any income derived from the following business of a person being a resident or a non-resident Bangladeshi for the period from the first day of July, 2008 to the thirtieth day of June, 2024 on the conditions that the person shall file income tax return in accordance with the provisions of section 75–

(i) Software development;

(ii) Software or application customization;

(iii) Nationwide Telecommunication Transmission Network (NTTN);

(iv) Digital content development and management;

(v) Digital animation development;

(vi) Website development;

(vii) Web site services;

(viii) Web listing;

(ix) IT process outsourcing;

(x) Website hosting;

(xi) Digital graphics design;

(xii) Digital data entry and processing;

(xiii) Digital data analytics;

(xiv) Geographic Information Services (GIS);

(xv) IT support and software maintenance service;

(xvi) Software test lab services;

(xvii) Call center service;

(xviii) Overseas medical transcription;

(xix) Search engine optimization services;

(xx) Document conversion, imaging, and digital archiving;

(xxi) Robotics process outsourcing;

(xxii) Cyber security services;

(xxiii) Cloud service;

(xxiv) System Integration;

(xxv) e-learning platform;

(xxvi) e-book publications;

(xxvii) Mobile application development service; and

(xxviii) IT Freelancing.

6. In case of information technology enabled services if there is no tax exemption certificate, tax will be deducted or not?

Answer:

In case of information technology enabled services, if the tax exemption certificate is not obtained, tax will have to be deducted.

Example-4

ABC Company Limited received the following services from RICO IT SOLUTION LTD.

• Cloud Service Cost Tk. 210,000(inclusive of VAT),
• Web site Service Tk. 21,000(inclusive of VAT).

RICO IT SOLUTION LTD. obtain tax exemption certificate on support and software maintenance service and web site service. Here’s how to calculate and deduct Tax from this bill.

• Information Technology Enabled Services i.e., Cloud Service Cost for tk. 210,000(inclusive of VAT), Web site Service for tk. 21,000(inclusive of VAT) has been received here.

• VDS on Information Technology Enabled Services is 5%.

• VDS on Cloud Service Cost for tk. 210,000 x 5/105 = tk. 10,000 &

• VDS on Web site Service for tk. 21,000 x 5/105 = tk. 1,000 to be deducted.

• Base value of Cloud Service Cost (210,000-10,000) = Tk. 200,000 &

• Base value of Web site Service (21,000-1,000) = Tk. 20,000.

• TDS will deduct on Cloud Service Cost 200,000 x 10% = tk. 20,000 to be deducted because RICO IT SOLUTION LTD does not obtained tax exemption certificate on Cloud Service.

Example-5

ABC Company Limited received the following services from BICO IT SOLUTION LTD.

• Cyber Security Service Tk. 105,000(inclusive of VAT),
• Web site hosting Tk. 33,600(inclusive of VAT).

BICO IT SOLUTION LTD. obtain tax exemption certificate on e-book publications, web site hosting, cloud service, digital content development & management. Here’s how to calculate and deduct Tax from this bill.

1. Information Technology Enabled Services i.e., Cyber Security Service for tk. 105,000(inclusive of VAT), Web site hosting for tk. 33,600(inclusive of VAT) has been received here.

• VDS on Information Technology Enabled Services is 5%.

• VDS on Cyber Security Service for tk. 105,000 x 5/105 = tk. 5,000 &

• VDS on Web site hosting for tk. 33,600 x 5/105 = tk. 1,600 to be deducted.

• Base value of Cyber Security Service (105,000-5,000) = Tk. 100,000 &

• Base value of Web site Service (33,600-1,600) = Tk. 32,000.

• TDS will deduct on Cyber Security Service 100,000 x 10% = tk. 10,000 to be deducted because BICO IT SOLUTION LTD does not obtained tax exemption certificate on Cloud Service.