The Last Leg of TDS/TCS Correction Marathon: 31 March 2026

Tax compliance in India has rarely been a sprint. For TDS and TCS deductors, it has always been a long-distance marathon—marked by quarterly filings, challan reconciliations, PAN validations, interest computations, late-fee adjustments, and an endless cycle of corrections. Over the years, the law permitted deductors to pause, recover, and correct their course, acknowledging that genuine errors often surface much later than the original filing.

That era is now drawing to a close.

31 March 2026 represents the final bend of this marathon. It is the last legal stretch in which deductors can look back, correct past missteps, and clear six years of accumulated compliance exposure relating to FY 2018-19 to FY 2023-24. Beyond this date, the track does not merely narrow—it ends. Errors left uncorrected will not just linger; they will harden into permanent, unalterable liabilities.

This moment has not arrived suddenly. Through successive legislative amendments—culminating in the Finance (No. 2) Act, 2024 and the Income-tax Act, 2025—the legislature has steadily shortened the distance allowed for post-facto correction. What was once a forgiving system has transformed into one that demands speed, precision, and finality.

The current framework provides a narrow transitional window—a final chance to reconcile challans, neutralise artificial demands, correct reporting errors, and close legacy mismatches before the law decisively moves from remedial flexibility to procedural closure.

This article explains why 31 March 2026 is the finish line, how the old and new laws intersect during this transition, and what every TDS/TCS deductor must do—now, not later—to avoid crossing that line too late.

Evolution of the Law: From Flexibility to Finality

a. The Old Regime

Under the earlier statutory framework—most recently reinforced by the Finance (No. 2) Act, 2024, with effect from 1 April 2025—the Income-tax law permitted deductors to furnish TDS/TCS correction statements within a period of six years from the end of the financial year in which the original quarterly statement was due. This extended correction window was consciously designed to acknowledge the practical realities of tax administration, where discrepancies often surface long after the initial filing. It enabled deductors to rectify PAN mismatches, align challan payments with deductee-wise reporting, recalibrate interest under section 201(1A) and late fees under section 234E, and resolve legacy demands generated due to systemic or reporting errors rather than actual tax shortfall. By allowing post-facto reconciliation across multiple years, the framework sought to ensure that substantive tax compliance prevailed over procedural lapses. At the same time, the six-year limit served as an outer boundary, reflecting the legislature’s intent that such remedial flexibility could not be open-ended and must ultimately give way to finality and closure.

(a) The New Regime

The Income-tax Act, 2025 marks a decisive shift away from this extended remedial approach by substantially curtailing the time available for filing TDS/TCS correction statements. Under section 397(3)(f), a deductor may now furnish a correction statement only within two years from the end of the tax year in which the original TDS or TCS statement was due. This sharp reduction—from six years to two—signals a clear legislative intent to prioritise accuracy and completeness at the stage of initial filing, rather than prolonged post-facto rectification. The new framework aims to compress the compliance lifecycle, reduce long-pending demands and disputes in the CPC-TDS system, and bring greater certainty for both the tax administration and deductees relying on timely credit of taxes. By limiting the correction window so drastically, the law effectively transfers the compliance burden upstream, compelling deductors to implement stronger internal controls, real-time reconciliation mechanisms, and more rigorous verification processes. In doing so, the legislature has consciously traded remedial flexibility for procedural finality, underscoring that corrections are now an exception rather than an enduring right.

31 March 2026: A Once-in-a-Lifetime Deadline

Notwithstanding the introduction of the stringent two-year correction restriction under the Income-tax Act, 2025, a limited transitional window continues to survive by virtue of the operation of the erstwhile legal framework for earlier financial years. Up to 31 March 2026, the six-year time limit prescribed under the old law remains applicable in respect of TDS/TCS statements pertaining to FY 2018-19 through FY 2023-24, thereby affording deductors a final opportunity to regularise past filings. However, this window is absolute and non-extendable. With effect from 1 April 2026, all such years will stand irrevocably time-barred, rendering them permanently immune from any form of correction, regardless of the existence of genuine errors, financial hardship, or substantive compliance on the part of the deductor. Beyond this date, the legal framework permits no rectification, no condonation of delay, and no administrative or discretionary relief, marking a definitive transition from remedial flexibility to procedural finality.

Combined Timeline: Old Act + New Act

After harmonizing provisions of the old law and the Income-tax Act, 2025, the following final TDS RETURN CORRECTION TIMELINE emerges:

What Every TDS Deductor Must Check — Without Exception

Before 31 March 2026, every deductor must undertake a comprehensive forensic review of TDS/TCS compliance for the preceding six financial years, rather than relying on piecemeal or year-specific checks. This exercise is no longer optional or routine in nature; it is a mandatory risk-mitigation review aimed at identifying and eliminating latent exposures that will otherwise become permanent once the statutory correction window closes. Such a review should go beyond merely checking filed returns and must involve a detailed reconciliation of challans, deductee-wise reporting, interest and late-fee computations, and CPC-TDS demand positions across all quarters. The objective is to ensure that no artificial demand, reporting mismatch, or unutilised tax credit survives past the 31-03-2026 deadline, as any unresolved issue thereafter will be legally incapable of correction. The following mandatory verification checklist outlines the critical areas that every deductor must examine without exception.

A. Outstanding Demands

The first and most critical area of verification is the existence of outstanding demands reflected in the CPC-TDS portal. Every deductor must carefully examine whether any demand has been raised on account of interest under section 201(1A), late fees under section 234E, short-deduction or short-payment of tax, or PAN-related mismatches. In a significant number of cases, such demands do not arise from an actual tax default but are the consequence of improper challan tagging, incorrect BSR code reporting, or mismatch between challan particulars and deductee-wise entries. Unless these mismatches are corrected through a valid correction statement, the system continues to reflect a demand which, if left unresolved beyond the statutory deadline, becomes permanent and enforceable.

B. Unutilised Challan Balances

An equally important yet frequently overlooked aspect is the presence of unutilised or excess balances lying in TDS challans. Many deductors remain unaware that the law permits utilisation of a challan having available balance for a period extending one financial year prior to and one financial year subsequent to the year to which the demand relates subject to proper reporting in correction statements. In practice, it is common to find cases where interest or tax has been duly paid, but the amount has not been appropriately adjusted or claimed in the TDS return, leading to the creation of artificial or inflated demands. A thorough review of challan utilisation across years is therefore essential to ensure that legitimate credits are fully absorbed before the correction window closes.

C. Late Payment versus Late Filing: A Common Compliance Fallacy

A recurring misconception among deductors is the belief that payment of interest automatically extinguishes the demand. In reality, the CPC-TDS system does not grant any automatic set-off of interest or fees unless such payment is accurately and expressly reported in the relevant TDS statement. Merely depositing interest for delayed payment or filing does not neutralise the demand unless the corresponding correction statement is filed. Consequently, the only legally recognised mechanism for eliminating such demands is through a properly filed correction return, and failure to do so before the statutory deadline will result in the demand remaining on record indefinitely.

5. Consequences of Inaction After 31-03-2026

Failure to act before 31 March 2026 will have irreversible legal and financial consequences for TDS/TCS deductors. Any unresolved demands as on this date will crystallise permanently, acquiring the character of final and enforceable liabilities with no statutory avenue for correction or adjustment. TAN defaults will continue to remain on record, adversely affecting the deductor’s compliance profile and credibility. Legitimate refunds, excess challan credits, and adjustment opportunities will stand forfeited, irrespective of their validity or quantum. Moreover, deductees may suffer denial or delay of tax credit in their returns, leading to avoidable disputes and reputational strain for the deductor. Most significantly, litigation exposure will increase. At the same time, the ability to seek administrative or procedural remedy will cease, leaving deductors burdened with disputes that could have been conclusively resolved within the permissible correction window.

Conclusion: Act Now or Lose the Right Forever

The legislative shift from a six-year correction window to a sharply curtailed two-year period unmistakably reflects Parliament’s intent to redefine the compliance ethos governing TDS and TCS—one where timeliness, accuracy, and finality are no longer aspirational but mandatory. 31 March 2026, therefore, is not merely another statutory deadline; it represents the last legally available exit for resolving six assessment years of accumulated TDS/TCS exposure. Every deductor—whether a company, trust, firm, society, or individual—must treat this date as non-negotiable and act with immediacy. Silence or inaction will be construed not as oversight, but as acceptance of finality. Once this threshold is crossed, the law will offer no second chances: errors will no longer be corrected; they will be inherited permanently, along with their financial, procedural, and reputational consequences.