In a critical move to enhance tax compliance, the Income Tax Department has announced that March 31, 2026, will be the final deadline for filing correction statements related to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) for financial periods ranging from the fourth quarter of FY 2018-19 to the third quarter of FY 2023-24. Taxpayers, employers, financial institutions, and property buyers are urged to take prompt action to amend any discrepancies in their tax filings and avoid potential penalties, mismatches in tax credits, or delays in refund processing.
New Legal Framework Limits Correction Window to Two Years
The landmark Income Tax Act, 2025, which comes into force from April 1, 2026, introduces significant changes, including a reduction in the correction period for TDS and TCS filings. Under Section 397(3)(f) of the new legislation, the timeframe for submitting correction statements is slashed from six years to just two years, calculated from the end of the relevant financial year. Consequently, March 31, 2026, becomes the ultimate deadline for rectifying errors from FY 2018-19 Q4 up to FY 2023-24 Q3.
Risks of Missing the Correction Deadline
Failure to rectify incorrect TDS or TCS statements by the deadline may have serious repercussions. In cases where tax is wrongly deducted—due to errors like incorrect PANs, invalid challan numbers, or mismatched tax amounts—taxpayers may lose the right to claim the appropriate tax credit. This can result in double taxation and trigger scrutiny by tax authorities, including the issuance of tax notices. Furthermore, incorrect records will hinder the seamless filing of Income Tax Returns (ITRs) and disrupt the reconciliation of tax payments and credits.
Who Should Act and Why
The responsibility to ensure the accuracy of TDS and TCS filings rests with all deductors and collectors of tax, including employers, banks, property buyers, and other financial entities. Equally, taxpayers must review their tax credit statements regularly to identify inconsistencies. Given the accelerated two-year correction window, it is imperative that all stakeholders undertake a thorough review of their records and file correction statements well in advance of the March 31, 2026 deadline to maintain compliance and secure timely tax refunds.
How to File Correction Statements
Tax deductors can correct errors in their TDS or TCS filings by submitting a correction statement through the official TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal. The process requires careful verification of all details, including PANs, challan numbers, and deducted amounts, to ensure accuracy. Prompt filing of these corrections helps avoid future disputes, erroneous tax burdens on deductees, and administrative hassles during tax return filing.
Proactive Measures Recommended
Experts strongly advise stakeholders not to delay action. A comprehensive reconciliation of all TDS and TCS statements for the specified period should be conducted at the earliest. Rectifying errors in a timely manner will safeguard against adverse consequences such as tax credit denials, potential penalties, or refund delays, especially once the new law takes effect.
Final Words
With the two-year correction window under the Income Tax Act, 2025 limiting the ability to amend past filings, the importance of adhering to the March 31, 2026 deadline cannot be overstated. Stakeholders must act now to ensure that all TDS and TCS records from FY 2018-19 Q4 to FY 2023-24 Q3 are accurate and fully reconciled to avoid legal and financial complications in the future.
Read More: High Court May Waive Pre-Deposit in Rare Cases, CESTAT Can’t: Delhi High Court
