Tax Credit Warning: The March 31, 2026, Deadline You Can’t Miss

Tax Credit Warning: The March 31, 2026, Deadline You Can’t Miss

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ITR Update: TDS/TCS Correction Window Slashed to 2 Years. What Does This Mean For You?

The Income Tax Department has issued a crucial advisory: the window for correcting TDS and TCS statements has been drastically reduced from six years to just two. This change is a direct result of the upcoming Income Tax Act, 2025, which will replace the existing 1961 Act on April 1, 2026.

Why is this a big deal for you?

If your employer, bank, or any other deductor has filed your TDS/TCS details with an error, you have a limited time to get it fixed. The advisory sets a hard deadline of March 31, 2026, for all corrections for periods between Q4 of FY 2018-19 and Q3 of FY 2023-24.

The Stakes Are High:

  • Loss of Tax Credit: If a correction is not filed by the deadline, the TDS credit you are entitled to will lapse. This means you could be forced to pay the tax again, even if it was already deducted from your income.
  • Tax Notices: Mismatches between your Form 26AS and your ITR can lead to tax notices from the department, requiring you to explain the discrepancy.

The New Law Explained:

The new Section 397(3)(f) of the 2025 Act states that a correction statement must be filed within two years from the end of the financial year in which the original statement was due. This new two-year rule, effective from April 1, 2026, replaces the previous six-year provision, forcing a more efficient and timely resolution of errors.

What You Must Do Now:

Taxpayers, deductors, and collectors must immediately review their records for any outstanding demands or discrepancies from transactions up to December 2023. Do not wait until the last minute. Ensure any necessary corrections are filed well before the March 31, 2026, deadline.

How Deductors Can File a Correction:

The process remains straightforward, but the timeline is now critical.

  1. Log in to TRACES: Access the official TRACES portal.
  2. Download the Consolidated File: Obtain the file containing the original TDS/TCS statement details.
  3. Prepare the Correction: Use the file to create a correction statement, including only the records that need to be updated.
  4. Validate and Upload: Validate the file using the FVU and then upload it via the NSDL website or a TIN-FC.

This shift to a two-year window promotes quicker action and greater transparency in tax filings, ultimately benefiting both taxpayers and the tax administration.

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