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

🔙 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)

  • ⛔ 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

📅 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 ₹10,000 to ₹1,00,000

  • ❌ Higher compliance and audit risks

  • ❌ Interest liability and possible disallowance of expenses

✅ 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

📌 Action Checklist for Deductors & Tax Professionals

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

Understanding TCS: Tax Collected at Source and Its Applicability

What is TCS?

TCS stands for Tax Collected at Source. It is a tax levied by the Indian government on certain specified transactions. Under the TCS provisions, the seller collects a specified percentage of the transaction value as tax from the buyer at the time of sale. The collected tax is then deposited with the government.

When is TCS Applicable?

TCS is applicable in various scenarios, including:

  • Sale of goods: TCS is applicable when a seller sells goods worth a certain threshold amount to a buyer.
  • Providing services: TCS is applicable when a seller provides specific services, such as hotel accommodation, tour packages, or event management services.
  • Remittance of money abroad: TCS is applicable when a person remits money outside India under the Liberalized Remittance Scheme.
  • Sale of scrap: TCS is applicable when a seller sells scrap, including scrap of any machinery or equipment.
  • Lottery and gambling: TCS is applicable on the sale of lottery tickets, horse race betting, or any other form of gambling.

Who is Responsible for TCS?

The responsibility for collecting and depositing TCS lies with the seller or the person receiving the payment. They are required to collect the tax from the buyer and deposit it with the government within the specified time frame.

However, there are certain exceptions where the buyer may be responsible for TCS. For example, in the case of remittance of money abroad, the buyer is required to deduct and deposit TCS if the seller does not have a Permanent Account Number (PAN) or Tax Deduction and Collection Account Number (TAN).

It is important for both the buyer and the seller to be aware of their responsibilities regarding TCS to ensure compliance with the tax laws.

In conclusion, TCS is a tax collected by sellers on specified transactions. It is applicable in various scenarios such as the sale of goods, provision of services, remittance of money abroad, sale of scrap, and lottery or gambling. The responsibility for collecting and depositing TCS lies with the seller, although there are exceptions where the buyer may be responsible. It is crucial for both parties to understand and fulfill their obligations to avoid any penalties or legal issues.