Income Tax Act 2025 alert: Time limit for filing TDS, TCS correction statements reduced. Key details here

Income Tax Act 2025 has reduced the time limit for filing correction statements by tax deductors for TDS and TCS to two years, with effect from April 1, 2026. Earlier, deductors were allowed to file correction statements for up to six years.

"The Income Tax Act 1961 stands repealed w.e.f 01.04.2026 by virtue of section 536 of Income Tax Act. Further, as per section 397(3)(f) of Income Tax Act, 2025, deductor/collector may deliver a correction statement in such form and verified in such manner as may be prescribed, to the prescribed authority within two years from the end of the tax year in which such statement is required to be delivered under the said clauses or under section 200 of the Income-tax Act, 1961," the CBDT said in a statement.

New deadlines for previous corrections

In view of the above provisions, tax deductors need to file correction statements for FY 2018-19(Qtr. 4), FY2019-20 to 2022-23 (Qtr. 1 to Qtr. 4) and FY 2023-24 (Qtr. 1 to Qtr. 3) by March 31, 2026. The correction statements for these years will not be accepted after April 1, 2026.

"Consequent to the above, correction statements for FY 2018-19(Qtr. 4), FY2019-20 to 2022-23 (Qtr. 1 to Qtr. 4) and FY 2023-24 (Qtr. 1 to Qtr. 3) shallbe 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," CBDT said.

The tax department further said, "Deductors /Collectors and other Stakeholders may kindly take note of the same and they are advised to take necessary steps to ensure all corrections for the above period, if any, are carried out in time as filing of the same for above period would be barred by limitation on 31.03.2026."

What are the key changes?

According to an advisory on the Traces portal, the following are the key changes under the new Income Tax provisions:

• The time limit for filing correction statements (TDS/TCS) has been reduced to 2 years.

• Earlier, deductors had a longer window to correct errors in filed TDS/TCS returns.

• Now, under the new provisions, corrections must be filed within a much shorter timeframe from the date of filing the original statement.

• Previously, 6 years were allowed, now it is only 2 years

How will this change affect deductors?

The new provision will ensure smooth credit to deductees, including salaried employees and other taxpayers. It will also help reduce disputes for tax deductors.

According to the Traces portal advisory, timely compliance is critical to avoid interest, penalties, and disallowances. The correct PAN, challan, and deduction details will ensure smooth credit to deductees. Further, errors not rectified in time can directly impact employees/vendors and create disputes.

The Traces portal further says that "the reduced time limit is a move towards faster reconciliation and real-time compliance."

It suggests deductors for adopting a proactive approach in filing accurate statements and timely corrections. This will help avoid penalties and protect the interests of deductees.