The finance ministry has removed multi-layered tax deduction in the software sector with effct from July 1. The Central Board of Direct Taxes issued a notification after the finance minister Pranab Mukherjee announced the relaxation a fortnight ago. ""... no deduction of tax shall be made on... payment by a person (transferee) for acquisition of software from another person (transferor), being a resident,"" the notification said.

At present, a tax of 10% is cut at each level of software chain--from distributor- dealer to retailer whenever a payment is made.

This had adversely impacted the software distribution industry that typically operates on thin margins and faces heavy revenue loss due to piracy.

The exemption from multi-level TDS would be applicable in case where the software is acquired in a subsequent transfer without any modification.

Besides, the exemption will also be provided in cases where tax has been deducted on payment for any previous transfer of such software. The benefit will also be available in cases wherever the transferor has already paid taxes.