New Regulations for TDS Return Rectification Applicable from 01-04-2026

TDS / TCS Correction Statements: Time Limit Cut Down to 2 Years (Effective 01 April 2026)

🔔 What’s the Latest Change?

The Income Tax Department has introduced a major compliance reform by reducing the time limit for filing TDS and TCS correction statements to just 2 years, applicable from 1 April 2026.

Until now, deductors had the flexibility to revise old TDS/TCS returns even after many years. This long-standing practice will no longer be permitted.

⏳ Key Change Explained: Old Rule vs New Rule

đź”™ Earlier Position (Before 01.04.2026)

  • No strict statutory deadline for filing correction statements

  • Corrections were practically allowed up to 7 years or more

  • Deductors commonly rectified:

    • Incorrect PAN details

    • Challan mapping errors

    • Short or excess deduction

    • Late reporting issues

  • Corrections were accepted even after several years

🔜 New Rule (From 01.04.2026)

  • â›” Correction statements allowed only within 2 years

  • The 2-year period will be calculated from:

    • End of the relevant financial year

  • ❌ No correction will be permitted beyond this period

  • This is a strict and absolute deadline, not extendable in any case

đź“… Last Opportunity for Old TDS/TCS Periods

Correction statements for the following quarters will be allowed only up to 31 March 2026:

  • Q4 of FY 2018–19

  • Q1 to Q4 of FY 2019–20 to FY 2022–23

  • Q1 to Q3 of FY 2023–24

⚠️ From 1 April 2026 onwards, the TRACES portal will permanently block corrections for these periods.

❌ Impact of Missing the 2-Year Deadline

Failure to file corrections within the prescribed time may result in:

  • ❌ Permanent denial of correction facility

  • ❌ Loss of TDS/TCS credit for deductees in Form 26AS / AIS

  • ❌ Disputes with employees, vendors, or contractors

  • ❌ Penalties ranging from â‚ą10,000 to â‚ą1,00,000

  • ❌ Higher compliance and audit risks

  • ❌ Interest liability and possible disallowance of expenses

âś… Reason Behind This Amendment

The department aims to promote:

  • Timely reconciliation of data

  • Faster and accurate credit to deductees

  • Reduced backlog of old corrections

  • Lower litigation and disputes

  • A shift towards real-time, technology-driven compliance

This change reflects a move towards strict timelines and disciplined reporting.

🧾 Best Practices Suggested by the Department

  • Regularly use TRACES utilities and validation tools

  • Track defaults and mismatches frequently

  • File correction statements immediately upon detecting errors

  • Train staff on the revised timelines

  • Adopt a preventive compliance approach

đź“Ś Action Checklist for Deductors & Tax Professionals

âś” Review all pending TDS/TCS correction requirements
âś” Resolve old mismatches before 31 March 2026
âś” Strengthen internal review and control systems
âś” Inform clients and staff about the 2-year non-negotiable limit

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