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Revised TDS Return Filing: TDS Correction Time Limit started

TDS

Finance Act (No. 2), stricter controls over Revised TDS return filings

The Finance Act (No. 2) has introduced a time limit for filing TDS correction statements, marking a significant shift in compliance requirements.

Time Restriction Introduced in Revised TDS return filings: 

  • Previously, there was no time limit for filing TDS correction statements, allowing endless revisions. Now, corrections will have to be made within a specified time frame, which is yet to be notified. The exact time limit for TDS corrections will be specified by the CBDT through a future notification.
  • Diductors will need to ensure accuracy in original filings to avoid last-minute corrections. Timely verification of TDS payments and reporting will become even more critical. Prevent frequent and dubious revisions that could be used for potential tax evasion or manipulation. Enhance transparency and accountability in TDS compliance.
  • It is crucial to ensure that deductors (such as banks, employers, or other entities) correct their TDS returns for past periods on or before March 31, 2025, because of the recent Amendment: The Finance Act (No. 2), 2024, introduced a significant change by imposing a time limit on filing revised TDS returns. Deductors now have until March 31, 2025, to correct TDS returns for the financial years 2007-08 to 2018-19. After this date, revisions for these years will no longer be possible.
  • Situations where tax deducted at source (TDS) by your bank, employer, or other deductors doesn’t appear in your Form 26AS or Annual Information Statement (AIS), it could be due to errors in the TDS returns filed by the deductor. This discrepancy prevents you from claiming the TDS credit in your Income Tax Return (ITR), potentially increasing your tax liability. Following change or impact are mentioned here under:

Deadline for Revising TDS Returns

  • The July Budget 2024 introduced a six-year time limit for revising TDS returns. For financial years 2007-08 to 2018-19, the last date to make corrections is March 31, 2025. After this date, deductors will no longer be able to rectify errors, meaning taxpayers will lose their right to claim TDS credits for those years.

Avoid Loss of TDS Credit

  • If the deductor filed the TDS return incorrectly (e.g., with the wrong PAN or incorrect details), the TDS credit won’t appear in the taxpayer’s Form 26AS or AIS. Without this credit, taxpayers cannot claim the deducted tax in their Income Tax Return (ITR). If corrections are not made before the deadline, taxpayers will permanently lose the TDS amount deducted on their behalf.

Prevent Higher Tax Liability

  • If a taxpayer cannot claim TDS credit, they will have to pay additional tax while filing their ITR. This could lead to double taxation—where tax is deducted but not credited to the taxpayer’s account.
  • Once the deductor corrects the TDS return, the updated credit will be reflected in Form 26AS/AIS. This allows the taxpayer to claim the TDS while filing ITR or apply for a refund. A corrected return also ensures compliance with tax laws and prevents unnecessary disputes with the tax department.

Taxpayers are suffering due to deductors’ failure to correct TDS returns.

  • Deductors’ Delays Cause Financial Burden: The taxpayer went to the bank to request a correction in the TDS return, but the bank failed to act. Due to the incorrect TDS filing, the taxpayer couldn’t claim TDS credit, leading to a pending tax demand. Meanwhile, interest kept accumulating on the tax demand, increasing the financial burden on the taxpayer.
  • Filing a grievance with the Tax Department Helps: Frustrated with the bank’s inaction, the taxpayer raised a grievance with the Income Tax Department. This highlights that when a deductor refuses to act, taxpayers can escalate the issue through the tax department’s grievance portal.
  • Income Tax Department’s Intervention Forced Action: The tax department issued a notice to the bank, questioning why it had not revised the TDS return. Only after receiving the official notice did the bank finally correct the TDS return, resolving the issue.
  • Lessons for Taxpayers: If a deductor (bank/employer) refuses to correct a TDS return, taxpayers should immediately file a grievance on the Income Tax e-filing portal. The March 31, 2025 deadline is critical—after this, revisions won’t be allowed, leading to permanent loss of TDS credit. The Income Tax Department can force non-compliant deductors to correct mistakes, so raising a grievance is an effective legal remedy.
  • Next Steps for Taxpayers: Review Form 26AS & AIS to check for missing TDS credits. Contact the deductor (bank/employer) immediately if discrepancies are found. Request them to revise the TDS return before March 31, 2025. Verify the correction in Form 26AS/AIS after the revision.

This is a one-time opportunity for taxpayers to rectify old TDS mismatches—missing this deadline could result in a permanent loss of TDS credit!

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