Every person responsible for deducting or collecting tax has dual compliance responsibilities:
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Deposit the tax with the Central Government, and
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File quarterly TDS/TCS statements (Sections 200 & 206C of the Income-tax Act, 1961).
To fix mistakes in these statements, the law also provided for correction statements. For years, there was no statutory time limit on filing corrections — allowing indefinite revisions and creating practical hardships for deductees who often suffered mismatched TDS credits.
The Amendment Journey
| Period | Law | Time Limit for Corrections |
|---|---|---|
| Till 31.03.2025 | Income-tax Act, 1961 (pre-amendment) | No statutory limit |
| 01.04.2025 – 31.03.2026 | Finance (No. 2) Act, 2024 (applies to 1961 Act) | 6 years from end of FY in which original statement due |
| From 01.04.2025 (new law in force for AY 2026–27 onwards) | Income-tax Act, 2025 (Section 397(3)(f)) | 2 years from end of tax year in which original statement due |
Key Change: What was once indefinite → then 6 years → is now just 2 years under the new Act.
CBDT Clarification – Transition Period
To ease the shift, CBDT has clarified:
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Correction statements will be accepted only up to 31st March 2026 for:
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FY 2018–19 (Q4),
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FY 2019–20 to FY 2022–23 (all quarters), and
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FY 2023–24 (Q1 to Q3).
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From 01.04.2026 onwards, these become time-barred — no correction will be entertained.
Delay in Payment of TDS/TCS – Interest
Even if statements are filed, late deduction or late deposit attracts mandatory interest:
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Delay in Deduction – 1% per month (or part) from date tax deductible till date actually deducted.
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Delay in Deposit – 1.5% per month (or part) from date of deduction till date actually paid to Government.
This is automatic and non-waivable.
Delay in Filing of TDS/TCS Statements – Fee & Penalty
| Default | Provision (1961 Act) | Provision (2025 Act) | Consequence |
|---|---|---|---|
| Late Filing | Sec. 234E | Sec. 406 | ₹200 per day, capped at TDS/TCS amount |
| Failure / Incorrect Statement | Sec. 271H | Sec. 407 | Penalty ₹10,000 – ₹1,00,000 (waivable if tax paid, statement filed, fee/interest cleared) |
Thus, late filing carries both per-day fee and potential penalty.
Analytical Impact of New Restriction
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No Lifeline After 2 Years: Once the correction window closes, mismatches or errors cannot be rectified — even if genuine.
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Deductee Risks: Employees, vendors, and other payees may lose credit permanently if their PAN/TDS entries remain wrong after time limit.
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Refund & Litigation Impact: Refund claims depending on corrected credits may fail; courts are unlikely to override explicit statutory bar.
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Business Compliance Burden: Companies must now ensure first-time accuracy in TDS filings.
Compliance Strategy Going Forward
Quarterly Reconciliation: Match books, challans, and TRACES each quarter.
File on Time: Avoid ₹200/day fee and interest by timely filing.
Correct Before March 2026: Use this one-time extended window for FY 2018–19 to FY 2023–24.
Strengthen Internal Controls: Treat TDS/TCS filing like GST returns — accuracy from the start.
Educate Vendors/Employees: Make them aware that corrections will not be possible after statutory cut-off.
Conclusion
The law has moved from indefinite correction → 6 years → just 2 years. Combined with interest for delay, late fees, and penalties, the message is clear:
“Deduct/collect on time, deposit on time, file on time, and file right the first time.”
The 31st March 2026 deadline is the last chance for old corrections. After that, compliance discipline is the only safeguard.
Act now — review, reconcile, and correct before the window closes.
