CBDT Alerts on New 2-Year Limit for TDS/TCS Corrections

News, dated 09-09-2025

1.Introduction

Section 200 of the Income-tax Act, 1961 lays down the duties of a person responsible for deducting tax under Chapter XVII-B. It requires the deductor to deposit tax deducted at source (TDS) with the Central Government and file prescribed statements within a specified time. A similar framework exists under Section 206C for tax collection at source (TCS). Both provisions include a mechanism to file correction statements for rectifying errors or updating details in the original submissions.

2. Background and Earlier Framework

Earlier, while timelines were prescribed for furnishing original TDS/TCS statements, there was no time limit for filing correction statements. This allowed taxpayers to make indefinite revisions. Although useful for rectifying genuine errors, the absence of a time limit created potential for misuse, prolonged uncertainty, and compliance hardship for deductees and collectees who depended on timely and accurate credit of taxes.

3. Amendment by Finance (No. 2) Act, 2024

To address these concerns, the Finance (No. 2) Act, 2024, effective from 1st April 2025, introduced a six-year time limit for furnishing correction statements. Accordingly, no correction could be filed after six years from the end of the financial year in which the original TDS/TCS statement was due. This amendment struck a balance by allowing sufficient time for rectification while preventing indefinite revisions.

4. Curtailment Under the Income-tax Act, 2025

The Income-tax Act, 2025 has further curtailed this period to two years. Section 397(3)(f) now provides that a correction statement may be furnished only within two years from the end of the tax year in which the original statement was due. This significant reduction aims to promote greater accuracy in initial filings, reduce prolonged disputes, and align tax compliance timelines with global best practices.

5. CBDT Clarification and Deadline

To alert taxpayers about the transition, the Central Board of Direct Taxes (CBDT) has issued a statement. Correction statements for FY 2018-19 (Q4), FY 2019-20 to FY 2022-23 (all quarters), and FY 2023-24 (Q1 to Q3) will be accepted only until 31st March 2026. After this date, such statements will be time-barred and will not be entertained from 1st April 2026 onwards. This clarification underscores the importance of timely compliance and serves as a final opportunity for taxpayers to regularise pending corrections.

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