How to Handle TDS Errors in Your ITR Filing and Avoid Scrutiny Notices for Misreporting

Bhavika Rajput
Jul 10
9 min read

When filing Income Tax Returns (ITR), taxpayers must ensure that the information on their returns is accurate, especially when it comes to TDS (Tax Deducted at Source). TDS is the amount deducted by an employer or payer from a person’s income and paid directly to the government. This tax deduction is reflected in the person’s Form 26AS, which serves as proof of the tax paid. However, errors in TDS data can lead to discrepancies between the TDS records and the income reported in the ITR, triggering scrutiny from the tax authorities. It's important to address TDS errors as early as possible to avoid penalties, interest, or delays in the processing of your tax refund.

What are TDS Errors and Why Do They Matter?
Common TDS Errors That Trigger Scrutiny
How to Handle TDS Errors in Your ITR Filing
Penalties and Consequences of Not Rectifying TDS Errors
Proactive Measures to Avoid TDS-Related Scrutiny
Conclusion
FAQs

What are TDS Errors and Why Do They Matter?

TDS errors occur when there is a mismatch between the TDS information reflected in Form 26AS and the details reported in the ITR. These errors can range from incorrect TDS amounts, mismatches in the PAN details, or errors in the employer’s or payer’s reporting. Since TDS payments are a direct credit against the total tax liability, it is essential that the details match perfectly between the TDS certificates (like Form 16 or Form 16A), Form 26AS, and the ITR filed.

TDS errors matter because they can delay the processing of your tax refund. If the Income Tax Department detects any discrepancy between the TDS details on the return and the tax credits reflected in the system, the return may be flagged for scrutiny. This can lead to unnecessary delays in the refund process and could even result in penalties if the discrepancies are not rectified promptly.

Common TDS Errors That Trigger Scrutiny

Several TDS errors are common in the filing process, and these errors can trigger scrutiny by the tax authorities. Some of the most common errors include:

Mismatch in TDS Amounts: If the TDS deducted by your employer or any other deductor is incorrectly reported in the ITR, it will create a mismatch with the Form 26AS, which can trigger scrutiny.
Incorrect PAN Details: If the PAN number mentioned in your TDS documents (Form 16/16A) does not match the one in the ITR, it will lead to discrepancies in the tax records. This is a frequent error that often triggers scrutiny.
TDS on Incorrect Income: If the income shown in the TDS certificate does not align with the income declared in the ITR, the tax authorities may question the mismatch.
TDS Not Reflected in Form 26AS: Sometimes, TDS may have been deducted but is not reflected in Form 26AS due to incorrect reporting by the deductor. This error could result in the tax authorities questioning the omission.
Failure to Report TDS Deductions: In some cases, taxpayers may forget to report the TDS deductions in their ITR, which could result in the mismatch and a delay in processing.

How to Handle TDS Errors in Your ITR Filing

To avoid the consequences of TDS errors, it is crucial to take proactive steps in identifying and rectifying them. Here’s how to handle TDS errors during your ITR filing:

Check Form 26AS: Always verify the TDS details in Form 26AS before filing your return. This form consolidates all the TDS deductions made during the year and is available through the Income Tax Department's e-filing portal.
Cross-Verify TDS With Employer/ Deductor: If there are discrepancies in the TDS amounts or if TDS isn’t reflected in Form 26AS, contact your employer or the deductor immediately. They may need to correct the error in their records and submit a revised TDS return.
Correct PAN Details: Ensure that your PAN details match across the TDS certificates, Form 26AS, and the ITR form. If there is any discrepancy, get it corrected before submitting your return.
Update Incorrect Information in ITR: If there are any errors or omissions in the TDS reporting in the ITR, make the necessary changes during the filing process. Use the correct TDS amount, and verify the income and other details carefully.
File a Revised Return: If you have already filed your ITR and later discover a TDS error, you can file a revised return under section 139(5). This will help correct the discrepancies and avoid penalties.

Penalties and Consequences of Not Rectifying TDS Errors

Failure to rectify TDS errors can have serious consequences, including:

Delayed Refunds: If there is a mismatch in TDS, your refund processing may be delayed as the Income Tax Department may need additional time to verify the correct TDS credits.
Tax Scrutiny and Audit: Continuous discrepancies in TDS records can result in a tax audit or scrutiny notice from the tax department. This process is time-consuming and may require additional documentation or clarifications.
Penalties and Interest: If the tax authorities find that you have underpaid your taxes due to TDS errors, you may be charged penalties under sections 234A (penalty for delay in filing returns), 234B (interest for default in payment of advance tax), and 234C (penalty for default in advance tax payments).
Loss of Tax Credit: In extreme cases, if TDS is not reflected in your Form 26AS or is incorrectly reported, you may lose out on the tax credit for the TDS already deducted, resulting in an increased tax liability.
Revised Return Filing: If you do not rectify the TDS errors, you may be required to file a revised return or face additional scrutiny. This could result in delays in processing and additional paperwork.

Proactive Measures to Avoid TDS-Related Scrutiny

To avoid the issues of TDS errors and the risk of scrutiny, here are some proactive measures you can take:

Regularly Monitor Form 26AS: Before filing your return, regularly monitor your Form 26AS to ensure all TDS deductions are correctly reflected. This will help you spot any discrepancies early and take corrective action.
Verify TDS Records Early: Ensure that all your TDS records are accurate well before the deadline. If there is any issue with TDS reflected in Form 26AS, communicate with the deductor or employer immediately to resolve the issue.
Reconcile Your Income and TDS: Always ensure that the income and TDS amounts match what has been reported in your salary slips, Form 16, or other TDS certificates. This will help in reducing errors when filing the return.
Use Reliable Filing Platforms: Use platforms like TaxBuddy, which help in validating TDS and other tax details before filing. This reduces human errors and ensures that your return is filed without discrepancies.
Seek Professional Help: If you're unsure about TDS reconciliation, it's a good idea to seek professional help. Tax consultants can help you ensure that your TDS records are correct and provide guidance on how to correct any discrepancies.

Conclusion

For hassle-free compliance and to minimize the risk of TDS errors, platforms like TaxBuddy offer both expert-assisted and self-filing options. TaxBuddy’s mobile app provides automated reconciliation of Form 16 and 26AS, real-time error detection, and expert support for handling notices or filing corrected returns. This ensures that your ITR filing is accurate, timely, and less likely to attract scrutiny or penalties.

FAQs

1. What should I do if my Form 16 TDS does not match Form 26AS?

If your Form 16 TDS does not match Form 26AS, you should immediately get in touch with your employer or the deductor to rectify the mismatch. Employers are responsible for issuing Form 16, and any discrepancies in TDS reporting should be corrected before you file your Income Tax Return (ITR). Once the discrepancy is resolved, you can obtain a revised Form 16 and ensure that both documents match before proceeding with your filing. Filing your ITR with mismatched TDS details can lead to processing delays and possible rejection, so it’s crucial to reconcile the two documents beforehand.

2. Can I correct TDS errors after the ITR filing deadline?

Yes, if you notice a TDS error after filing your ITR, you can still correct it by filing a revised return using the ITR U facility. This facility allows taxpayers to update any mistakes in their original returns within four years from the end of the relevant assessment year. This flexibility ensures that taxpayers can make necessary corrections to TDS details or other information without facing penalties, as long as the changes are made within the allowed time frame.

3. What penalties can I face for incorrect TDS reporting?

Incorrect TDS reporting can attract penalties under various sections of the Income Tax Act. Under Section 271C, if TDS is not deducted or deposited correctly, penalties can range from 100%-300% of the unpaid tax. Additionally, under Section 271H, if the TDS return is filed late or with errors, you could face penalties ranging from ₹10,000 to ₹1 lakh. Interest on the unpaid TDS can also be charged under Section 234B and 234C. To avoid such penalties, ensure that your TDS details are accurate and reconcile them with Form 26AS before filing your return.

4. How do I respond to a TDS mismatch notice from the Income Tax Department?

If you receive a TDS mismatch notice from the Income Tax Department, you must take prompt action. First, carefully review the notice and check the discrepancies between your TDS details in Form 16 and Form 26AS. After identifying the error, you should file a revised return, correcting the TDS mismatch. Ensure that you provide the correct TDS details and any supporting documents as required. Submit the revised return within the prescribed deadline to avoid penalties or further notices from the department.

5. Does TaxBuddy help with both self-filing and expert-assisted ITR filing?

Yes, TaxBuddy provides both self-filing and expert-assisted ITR filing options. For those who are comfortable filing their returns independently, TaxBuddy’s self-filing platform offers easy-to-use tools to guide you through the process. For those who prefer expert assistance, TaxBuddy’s team of professionals can provide personalized support, ensuring that your return is filed accurately and in compliance with all regulations. The platform also includes mobile app support, allowing you to detect errors, reconcile documents, and get expert guidance wherever you are.

6. How can I track the status of my ITR refund?

To track the status of your ITR refund, you can visit the official Income Tax Department website. On the e-filing portal, log in with your PAN (Permanent Account Number) and the assessment year for which you filed the return. The refund status will be displayed once the department processes your return. If you filed your return using TaxBuddy, you can also track the refund status through the platform’s interface, which provides real-time updates on your filing and refund progress.

7. What happens if I miss the ITR filing deadline?

If you miss the ITR filing deadline, you can still file a belated return by December 31, 2025, for FY 2024-25 (Assessment Year 2025-26). However, filing late comes with consequences, including penalties and interest on unpaid taxes. The penalty for belated filing can range from ₹1,000 to ₹5,000, depending on when the return is filed. To avoid such penalties and delays, it’s important to file your ITR as soon as possible, even if you miss the deadline.

8. Can I file my ITR if I don't have Form 16?

Yes, you can file your ITR without Form 16. While Form 16 is a helpful document, it’s not mandatory for filing your return. You can use Form 26AS, which reflects the TDS deducted from your income, or gather your income details from other documents such as salary slips, bank statements, or financial statements. In the absence of Form 16, you can report your income and TDS deductions manually, but you must ensure the accuracy of the data to avoid discrepancies and errors in your ITR.

9. How do I file my ITR if I have multiple sources of income?

If you have multiple sources of income, you can still file your ITR by reporting each income source separately. Taxpayers with multiple income sources, such as salary, business profits, interest income, and capital gains, need to report each one in the relevant sections of the ITR form. TaxBuddy provides a step-by-step guide to ensure that all income is reported correctly and that the appropriate deductions and exemptions are applied. It's crucial to maintain all supporting documents, such as salary slips, bank statements, and financial records, for accurate reporting.

10. Is there any penalty for failing to pay advance tax?

Yes, failing to pay advance tax on time can result in penalties and interest charges. According to the Income Tax Act, taxpayers who have a liability of over ₹10,000 are required to pay advance tax in four installments during the year. If you miss an installment or fail to pay the required amount, you will be charged interest under Section 234B and Section 234C. The interest is calculated on the amount of tax that was due but not paid on time, and the penalty could increase if the delay is prolonged.

11. Can I file my ITR after receiving a tax notice?

Yes, you can still file your ITR after receiving a tax notice, but the notice may relate to missing or incorrect filings. If you have not filed your return or need to correct it, the Income Tax Department will allow you to file a revised return or belated return to comply with the notice. The notice will typically outline the reasons for the communication, and you will need to address the issue within the specified time frame to avoid penalties.

12. How can TaxBuddy help me if I have received a tax notice?

TaxBuddy can help you manage and respond to tax notices efficiently. If you’ve received a notice for issues like missed TDS credits, underreporting of income, or filing mistakes, TaxBuddy’s expert team can guide you through the process of filing a revised return or responding to the notice. The platform offers assistance in ensuring that the correct information is submitted and that your filing is compliant with all regulations, thus reducing the chances of further scrutiny or penalties.