Understanding TDS Mismatches

In recent times, many taxpayers have been receiving notices from the Income Tax Department regarding TDS mismatches. These notices are generated when there's a discrepancy between the TDS reported by deductors (like employers or banks) and what's reflected in the taxpayer's records. This situation can lead to additional tax liabilities and penalties if not addressed promptly[2][4].

Common Causes of TDS Mismatch

• Incorrect Reporting: The deductor might report wrong or incomplete information to the tax department, which in turn affects the taxpayer's Form 26AS or Annual Information Statement (AIS)[2].
• Non-Deposit of TDS: Sometimes, TDS is not deposited with the government as required, leading to discrepancies[3].
• PAN Details: Inaccurate PAN numbers used by the deductor can cause TDS records to not link properly to the taxpayer’s account[2].

Deadline for Correcting TDS Mismatches

March 31, 2025, marks a critical deadline for taxpayers to rectify TDS mismatches. The Finance Act (No. 2), 2024, has introduced a time limit for filing TDS correction statements. Deductors must file correction statements for financial years 2007-08 to 2018-19 by this date. Any corrections after March 31, 2025, for these years will no longer be possible, potentially resulting in the permanent loss of TDS credits and higher tax liabilities for affected taxpayers[1][3].

Steps to Resolve TDS Mismatch

If you receive a TDS mismatch notice, here are the steps to resolve the issue:

1. Understand the Notice

Carefully review the notice to identify the discrepancy, which usually pertains to differences in reported TDS amounts or PAN details[2][4].

2. Check Form 26AS

Verify your TDS details in Form 26AS, available on the income tax e-filing portal. Compare these details with those in your income tax returns to pinpoint any discrepancies[2].

3. Contact the Deductor

Reach out to the deductor (e.g., employer or bank) to rectify any errors in their TDS return filings. This may involve submitting correct PAN details or resolving deposit issues[2][3].

4. Submit Corrections

Ensure that the deductor files a TDS correction statement as soon as possible. This correction will update Form 26AS and AIS, allowing you to claim the correct TDS credits and prevent any unnecessary tax demands[1][3].

5. File a Revised Return (if needed)

If the correction affects your tax liability, you may need to file a revised income tax return to adjust your tax calculations and avoid any disputes with the tax department[2][3].

Consequences of Not Addressing TDS Mismatch

Failure to resolve TDS mismatches can lead to:

• Additional Tax Liabilities: You may end up paying more taxes than necessary if TDS credits are not accounted for correctly.
• Penalties and Interest: Unresolved mismatches can result in penalties and interest charges, which can be costly.
• Delayed Refunds: Incorrect TDS reporting may delay your tax refunds or even result in no refund at all.

Preparing for Future Compliance

Given the new time limits for TDS corrections, it's crucial for both deductors and taxpayers to ensure accurate and timely reporting to avoid last-minute discrepancies and potential penalties. Regular checks on TDS records and prompt communication with deductors can help prevent such mismatches in the future.

Tips for Avoiding TDS Mismatches:

• Regularly Review Form 26AS: Ensure that the TDS details in your Form 26AS match those in your income tax returns.
• Verify PAN Details: Make sure your PAN details are correctly entered by the deductors.
• Promptly Address Discrepancies: If you notice any discrepancies, contact the deductor immediately to resolve the issue.

By taking proactive steps to resolve any TDS mismatches before March 31, 2025, taxpayers can avoid unnecessary financial stress and ensure compliance with evolving tax regulations.