TDS/TCS Compliance Update 2026: Final Deadline & New 2 Year Limit for Correction Statements

Statutory Compliance Alert for All Deductors and Collectors 

This is to notify all Tax Deductors and Tax Collectors that, pursuant to the provisions of Section 397(3)(f) of the Income-tax Act, 2025, the Government has prescribed a final and non‑extendable deadline for filing TDS/TCS correction statements pertaining to earlier financial years.

Final Cut‑off Date for Filing Corrections : 31 March 2026

Effective 1 April 2026, the Income Tax Department’s system will permanently discontinue the acceptance of any correction (revised) statements for the financial periods specified below.

Financial Years Affected

Corrections will be disallowed for the following periods after the aforesaid deadline:

• FY 2018–19 – Quarter 4 only
• FY 2019–20 – All quarters
• FY 2020–21 – All quarters
• FY 2021–22 – All quarters
• FY 2022–23 – All quarters
• FY 2023–24 – Quarters 1 to 3

Important Advisory

Deductors and collectors are strongly advised to:

• Review all historical TDS/TCS filings for the above-mentioned periods.
• Identify any pending inaccuracies, defaults, or unreported transactions.
• Submit required correction statements on or before 31 March 2026 to avoid permanent closure of the correction window.

Failure to adhere to the deadline may result in inability to rectify defaults, which could lead to demand notices, interest, and penalties based on uncorrected entries.

Immediate Action Required

If any of the following are pending, file correction statements before 31 March 2026:

                •              PAN errors

                •              Challan mismatches

                •              Short deduction / defaults

                •              Unmatched entries

Failure to correct within time may result in permanent demands, disallowances, penalties, and credit issues for deductees.

  

TDS/TCS CORRECTION TIMELINE – KEY CHANGE

The Income Tax Department has introduced a significant change in the permissible time frame for filing TDS/TCS correction statements. Earlier, deductors and collectors were allowed a period of up to six years from the end of the financial year to revise or rectify their original TDS/TCS statements. This extended window provided ample opportunity to identify and correct inaccuracies, mismatches, or reporting errors. However, under the revised compliance framework, the allowable period has now been substantially reduced to just two years from the date of filing the original statement. This represents a major shift in regulatory timelines and requires deductors and collectors to exercise greater diligence and timely review of all filed statements. Moving forward, any corrections must be initiated well within this strict two‑year statutory limit, as revisions beyond this timeframe will no longer be permitted by the system.

 Implications for Deductors

                •              Corrections must be done quickly.

                •              Delays beyond 2 years may make errors irreversible.

                •              Uncorrected defaults can lead to:

                •              Expense disallowance

                •              Demand & penalties

                •              Deductee credit mismatches

Tax Amendments 2026 – Key Changes in Income Tax Act, 1961

v     Assessment / Returns / Procedure

• Sec 92CA – TPO order deadline rationalised (fixed month-based timeline).
• Sec 139(1) – ITR due date extended to 31 August for business/professional non-audit cases.
• Sec 139(5) – Revised return allowed till end of Assessment Year (31 March); extended period subject to late fee u/s 234-I.
• Sec 139(8A) – Updated return allowed in response to Sec 148 notice, including loss reduction cases.
• Sec 140B – Additional tax on updated return increased by 10% when filed after reassessment notice.

v       DRP / Reassessment / Jurisdiction

• Sec 144C – Retrospective clarification: specific DRP timelines override general limitation rules.
• New Sec 147A – Notices u/s 148/148A must be issued by jurisdictional AO, not NFAC (retrospective from 1-4-2021).
• Sec 153 – Draft order timeline aligned with overall assessment limitation.
• Sec 153B – Draft order in search cases allowed anytime up to final limitation date.
• Demand / Appeals / Penalty Relief
• Sec 220 – No interest on penalty demand u/s 270A until CIT(A) / ITAT order.
• New Sec 234-I – Late fee for revised return filed beyond 9 months:   
         ₹1,000 (income ≤ ₹5L)   
         ₹5,000 (others)
• Sec 245MA – DRC may waive imposed OR imposable penalties.
• Sec 270A – No penalty for under-reporting if additional tax paid on updated return filed after notice.
• Sec 270AA – Immunity expanded to include misreporting cases upon payment of required tax.
• Sec 274 – Show-cause notice mandatory; from 1-4-2027, penalty u/s 270A to be imposed within assessment order itself.

      Prosecution Rationalisation (Decriminalisation Focus)

• Sec 275A – Contravention during search → simple imprisonment (up to 2 years).
• Sec 275B – Obstructing inspection → punishment reduced to simple imprisonment up to 6 months.
• Sec 276 – Recovery obstruction punishment converted to simple imprisonment

TDS / TCS Defaults – Tiered Punishment Introduced

• Sec 276B (TDS)

                •              Up to ₹10L → Fine only

                •              ₹10L–₹50L → up to 6 months imprisonment / fine / both

                •              Above ₹50L → up to 2 years imprisonment / fine / both

                •              Immunity if tax paid before return due date.

• Sec 276BB (TCS) – Same structure as above.
• Sec 276C – Wilful tax evasion now tiered by amount.
• Sec 276CC – Non-filing of return decriminalised for small cases (fine only up to ₹10L).
• Sec 276CCC – Same relaxation for search return defaults.
• Sec 276D – Special audit non-compliance → simple imprisonment up to 6 months.
• Sec 277 – False verification punishment now tiered.
• Sec 277A – Falsification of books → simple imprisonment up to 2 years (minimum removed).
• Sec 278 – Abetment punishment tiered by tax amount.
• Sec 278A – Repeat offence punishment reduced to up to 3 years.
• Sec 280 – Public servant disclosure offence → up to 1 month imprisonment / fine / both.
  
  

Procedural Safeguard

New Sec 292BA

An assessment or notice will not become invalid just because there is a mistake in the DIN (Document Identification Number), as long as the order can still be clearly identified through other details like PAN, date, officer details, or assessment year.

 Conclusion / Guidelines

The 2026 amendments bring faster timelines, stricter compliance, and clearer procedures across TDS/TCS, assessment, reassessment, and penalties. With the correction window reduced to two years and several processes now time‑bound or rationalized, taxpayers must stay alert and act promptly. Ensuring timely filing, reviewing past data, responding quickly to notices, and maintaining accurate records will be crucial to avoid penalties, prosecution, and irreversible defaults under the new framework.