Last Chance to Correct TDS Returns — Critical Deadline of 31st March 2026
If you have any pending corrections in your TDS or TCS returns for past financial years, 31st March 2026 is your last and final opportunity to file them. After this date, those returns will be permanently time-barred and no corrections will be accepted — ever.
This is not a routine compliance reminder. This is a once-and-final closing window that affects lakhs of deductors, employees, and businesses across India.
Legal Background — What Has Changed and Why
Earlier Position (Before Finance Act 2024 & Income Tax Act 2025)
Under the old framework of the Income Tax Act, 1961, there was no statutory time limit for filing correction statements for TDS/TCS returns. A deductor could technically correct a TDS return filed 8–10 years ago. While this flexibility was useful for genuine corrections, it also led to:
- Prolonged reconciliation issues
- Delayed TDS credits for deductees
- Misuse of the correction window
- Backlog of over 20 lakh pending correction cases (estimated by CBDT)
New Position — Section 200(3) Amended by Finance Act (No. 2), 2024
The Finance Act (No. 2), 2024 introduced a statutory time limit for filing correction statements under Section 200(3) of the Income Tax Act, 1961. This was the first step in tightening the correction window.
Final Position — Section 397(3)(f) of the Income Tax Act, 2025
The Income Tax Act, 2025 — which repeals the Income Tax Act, 1961 with effect from 1st April 2026 (vide Section 536 of the Income Tax Act, 2025) — has further curtailed the correction window to only 2 years from the end of the financial year in which the original TDS/TCS statement was due.
As per Section 397(3)(f) of the Income Tax Act, 2025:
"A correction statement may be furnished only within two years from the end of the tax year in which the original statement was required to be delivered."
CBDT Official Notification — TRACES Portal Advisory
The Central Board of Direct Taxes (CBDT) has issued an official advisory on the TRACES portal (traces.gov.in) confirming the following:
"In view of Section 397(3)(f) of Income Tax Act, 2025, correction statements for FY 2018-19 (Qtr. 4), FY 2019-20 to 2022-23 (Qtr. 1 to Qtr. 4) and FY 2023-24 (Qtr. 1 to Qtr. 3) shall be accepted only up to 31st March 2026. The same are time-barred by limitation on 31.03.2026 and would not be accepted from 01.04.2026 onwards."
Source: Official TRACES Portal — CBDT Advisory
Which Financial Years Are Time-Barred on 31st March 2026?
This is the most important table every deductor must check right now:
| Financial Year | Quarters | Deadline | Status After 31.03.2026 |
|---|---|---|---|
| FY 2018-19 | Quarter 4 only (Jan–Mar 2019) | 31st March 2026 | ❌ Permanently Barred |
| FY 2019-20 | All 4 Quarters | 31st March 2026 | ❌ Permanently Barred |
| FY 2020-21 | All 4 Quarters | 31st March 2026 | ❌ Permanently Barred |
| FY 2021-22 | All 4 Quarters | 31st March 2026 | ❌ Permanently Barred |
| FY 2022-23 | All 4 Quarters | 31st March 2026 | ❌ Permanently Barred |
| FY 2023-24 | Q1, Q2, Q3 only | 31st March 2026 | ❌ Permanently Barred |
| FY 2023-24 | Q4 (Jan–Mar 2024) | 31st March 2026 | ❌ Permanently Barred |
| FY 2024-25 | All Quarters | 31st March 2027 | ✅ 2 years from FY end |
| FY 2025-26 | All Quarters | 31st March 2028 | ✅ 2 years from FY end |
Important Note on FY 2018-19: Only Quarter 4 (January to March 2019) is covered under the transitional window. Quarters 1, 2, and 3 of FY 2018-19 were already time-barred earlier and corrections for those quarters are not available even now.
Practical Examples — Understanding the Impact
Example 1 — Wrong PAN of Employee (FY 2020-21)
Scenario: ABC Pvt. Ltd. deducted TDS of ₹85,000 on salary of Mr. Ramesh in FY 2020-21 but filed the TDS return (Form 24Q) with a wrong PAN of the employee. As a result, Mr. Ramesh's Form 26AS does not reflect this TDS credit and he has been unable to claim refund for 4 years.
Solution: ABC Pvt. Ltd. must file a PAN correction in the TDS return for FY 2020-21 on TRACES before 31st March 2026.
What happens if not corrected? After 31st March 2026, this correction will be permanently barred. Mr. Ramesh will permanently lose the TDS credit of ₹85,000. He may also face demands from the Income Tax Department for the same amount showing as uncredited tax.
Example 2 — Challan Mismatch (FY 2021-22)
Scenario: XYZ & Co. deposited TDS of ₹1,20,000 in FY 2021-22 but due to a data entry error, the challan was tagged to the wrong quarter in the TDS return. The demand shows as outstanding in TRACES.
Solution: File a challan correction on TRACES for FY 2021-22 before 31st March 2026.
Penalty risk if ignored: Outstanding demand under Section 201(1) for short deduction + Interest under Section 201(1A) at 1% per month from date of deduction to date of correction.
Example 3 — Short Deduction Entry (FY 2022-23)
Scenario: A company paid ₹5,00,000 to a contractor in Q2 of FY 2022-23 but by mistake entered ₹50,000 in the TDS return. The deductee's Form 26AS reflects only partial credit.
Solution: File correction to update the correct amount in the return for Q2 of FY 2022-23 before 31st March 2026.
Example 4 — Future Filing (FY 2024-25 Onwards)
Scenario: A deductor files TDS return for Q3 of FY 2024-25 (October to December 2024) in January 2025. An error is noticed in March 2027.
Under new 2-year rule: FY 2024-25 ends on 31st March 2025. Two years from that date = 31st March 2027. The correction can still be filed — but just barely. If noticed in April 2027, it will be permanently barred.
Key takeaway: Under the new regime, deductors have a maximum of 2 years only. There is no grace period, no extension, and no exception.
What Corrections Can Be Made — Types of TDS Corrections
Before the deadline, deductors should check and correct the following types of errors on TRACES:
| Type of Correction | What It Covers |
|---|---|
| PAN Correction | Wrong or invalid PAN of deductee entered in original return |
| Challan Correction | Wrong BSR code, challan serial number, deposit date, or amount |
| Deductee Details | Name, amount, TDS rate or section code errors |
| Addition of New Deductee | A transaction missed entirely in original return |
| Salary Detail Correction | Errors in Form 24Q Annexure II for salary deductions |
Consequences of Missing the 31st March 2026 Deadline
Missing this deadline is not just a compliance lapse — it has real financial consequences for both deductors and deductees:
For Deductees (Employees / Vendors):
- Permanent loss of TDS credit in Form 26AS / AIS
- Refund claims permanently blocked
- Mismatch notices from Income Tax Department
- Additional tax demand on income already taxed at source
For Deductors (Employers / Companies):
- Demand notices under Section 201(1) for short deduction
- Interest liability under Section 201(1A) — 1% per month for non-deduction, 1.5% per month for non-deposit
- Penalty under Section 271H — ₹10,000 to ₹1,00,000 for incorrect TDS returns
- Prosecution risk under Section 276B in serious cases
Going Forward — New 2-Year Rule for All Future Corrections
From 1st April 2026 onwards, the Income Tax Act, 2025 governs all TDS/TCS filings. Under the new regime:
| Financial Year | Last Date for Any Correction |
|---|---|
| FY 2023-24 (Q4) | 31st March 2026 |
| FY 2024-25 | 31st March 2027 |
| FY 2025-26 | 31st March 2028 |
| FY 2026-27 | 31st March 2029 |
The 2-year window is strict and absolute. CBDT has made it clear there will be no extensions.
Action Checklist for Deductors — Do This Before 31st March 2026
✅ Login to TRACES and check all pending Justification Reports for FY 2019-20 to FY 2023-24
✅ Download Form 26AS / AIS of your key employees and vendors to identify mismatches
✅ Check for any outstanding demands on TRACES for old quarters
✅ Identify PAN errors, challan mismatches, and amount discrepancies
✅ File all correction statements before 25th March 2026 — don't wait for the last day as TRACES portal may be slow
✅ After corrections, download updated Form 16A for vendors and Form 16 for employees
✅ Reconcile corrected data with AIS (Annual Information Statement)
Need Help With TDS Corrections?
At Krishna and Associates, our experienced team of tax professionals specialises in TDS compliance, correction filing, and notice handling. We have successfully assisted clients across multiple industries in identifying and resolving TDS return errors.
Our team can:
- Review all your pending TDS returns for FY 2019-20 to FY 2023-24
- Identify errors using Justification Reports on TRACES
- File all necessary corrections before the 31st March 2026 deadline
- Ensure your employees and vendors get correct TDS credit in their Form 26AS
Don't let this deadline pass. Reach out to us today:
📧 krishna@taxurity.in
🌐 www.taxurity.in
Tax Clarity for Every Business.
Disclaimer: This article is for general information purposes only and is based on laws and notifications applicable as of February 2026. Readers are advised to consult a qualified tax professional for advice specific to their situation.
© 2026 Krishna and Associates. All rights reserved.
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