Under the Income Tax Act, 2025, the time limit for tax deductors to file correction statements for TDS and TCS has been reduced to two years, effective April 1, 2026. Previously, the limit was six years.
The Income Tax Act, 1961, will be repealed effective April 1, 2026, as per Section 536 of the new Income Tax Act, 2025. Under the new provisions, specifically Section 397(3)(f) of the Income Tax Act, 2025, a deductor or collector may file a correction statement, in the prescribed form and manner, with the relevant authority. The time limit for submitting this correction statement is two years from the end of the financial year in which the original statement was required to be filed, either under the new provisions or Section 200 of the repealed Income Tax Act, 1961.
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Revised Deadlines for Filing Tax Correction Statements
Tax deductors must file correction statements for FY 2018–19 (Q4), FY 2019–20 to 2022–23 (Q1 to Q4), and FY 2023–24 (Q1 to Q3) by March 31, 2026. For statements relating to tax years governed by the IT Act, 1961, correction statements will not be accepted after April 1, 2026.
Consequent to the above, correction statements for FY 2018–19 (Q4), FY 2019–20 to 2022–23 (Q1 to Q4), and FY 2023–24 (Q1 to Q3) will be accepted only up to March 31, 2026. These statements will become time-barred after March 31, 2026, and will not be accepted from April 1, 2026, onwards, the CBDT stated.
The tax department further stated, 'Deductors, collectors, and other stakeholders are advised to take note of this and ensure that all necessary corrections for the above period, if any, are completed within the stipulated time. Filing of correction statements for the mentioned period will be barred by limitation after March 31, 2026.
Summary of Key Changes and Amendments
According to an advisory issued on the TRACES portal, the tax department has highlighted some key changes under the new income tax provisions.
- According to the latest government regulation, the time limit for filing TDS/TCS correction statements has been shortened to two years.
- Previously, deductors were allowed a longer period of time to correct errors and discrepancies in their filed TDS/TCS returns.
- Under the new provisions, corrections must now be filed within a much shorter timeframe from the date of filing the original statement, compared to the previously longer window.
- Previously, deductors were allowed a six-year window to correct errors in filed TDS/TCS returns; however, under the new law, this period has been significantly shortened to only two years.
Impact of New Tax Law Changes on Deductors
The new provision is designed to ensure seamless credit for deductees, such as salaried employees and other taxpayers, while also helping to minimise disputes for tax deductors.
According to the TRACES portal advisory, timely compliance is essential to avoid interest, penalties, and disallowances. Ensuring accurate PAN, challan, and deduction details helps facilitate smooth credit for deductees. Moreover, unrectified errors can adversely affect employees or vendors and may lead to potential disputes.
The Traces portal further says that "the reduced time limit is a move towards faster reconciliation and real-time compliance."
The advisory recommends that deductors take a proactive approach by submitting accurate statements and promptly addressing any necessary corrections. This practice helps prevent penalties and protects the interests of deductees.