Receiving a TDS mismatch notice from the Income Tax Department can be an unsettling experience for many taxpayers. Whether you are a salaried employee, a business owner, or a professional, any discrepancy in the Tax Deducted at Source (TDS) records can delay your refund, trigger scrutiny, or even lead to penalties. TDS is deducted by employers or other deductors and reported to the government through Form 26AS and the TRACES portal. When there is a mismatch between what you claim and what is reflected in official records, it results in a TDS mismatch notice. Understanding the reasons behind such notices is key to resolving them swiftly and avoiding future complications.
What Is a TDS Mismatch?
The Basics of TDS Reporting
TDS is a system where tax is deducted at the source of income and deposited with the government on your behalf. This deducted tax appears in your Form 26AS, which is a consolidated annual tax statement reflecting all taxes paid or deducted during a financial year. When you file your Income Tax Return (ITR), your claimed TDS should match the information in Form 26AS. A mismatch occurs when there is a discrepancy between the TDS amount claimed in your ITR and what is actually reported by the deductor.
Impact of Mismatch
Mismatch in TDS can result in:
- Delay in processing of income tax returns
- Rejection or delay in tax refund
- Issuance of tax demand notice
- Possible scrutiny or assessment by the tax department
Common Reasons for TDS Mismatch Notices
1. Incorrect PAN Details Provided to Deductor
One of the most common causes of TDS mismatch is the incorrect entry of the Permanent Account Number (PAN) by the employer or deductor. If the wrong PAN is reported while filing the TDS return (Form 24Q, 26Q, etc.), the deducted amount will not appear under your PAN in Form 26AS. As a result, when you claim that TDS amount in your return, it won’t match official records.
2. Delay in Filing of TDS Return by Deductor
If your employer or deductor delays filing the quarterly TDS returns with the Income Tax Department, the amount deducted from your income will not show up in Form 26AS at the time of your ITR filing. This often results in a mismatch notice. The TDS may have been deducted properly but not yet reflected in the system.
3. TDS Not Deposited with Government
In rare cases, the TDS may have been deducted but not deposited by the deductor with the government. This constitutes a serious compliance failure on their part. However, from the department’s point of view, the tax has not been paid, leading to a mismatch and likely a tax demand notice.
4. Errors in TDS Return Filing by Deductor
Sometimes, even if TDS is deposited correctly, the deductor might have made errors in reporting such as entering the wrong assessment year, incorrect section code, or mismatched amounts. These technical errors will cause the TDS entry to be wrongly recorded or not reflected at all in your Form 26AS.
5. Claiming TDS in Wrong Assessment Year
If you mistakenly claim TDS in the incorrect assessment year while filing your return, it will not match the department’s records. For example, if the TDS was deducted in Financial Year 2023-24 (Assessment Year 2024-25), but you claim it in AY 2023-24, it will result in a mismatch.
6. Typographical Errors While Filing ITR
Manual errors while entering TDS details in your Income Tax Return such as entering the wrong TAN of the deductor, incorrect amount, or wrong section may lead to discrepancies. Even a single-digit mistake can cause a mismatch that prompts a notice.
7. Duplicate TDS Claims
Claiming the same TDS amount more than once, or including TDS already claimed in a previous year, may result in the total claim exceeding the actual deduction, triggering a TDS mismatch notice. This sometimes happens with individuals who revise their returns without adjusting previously claimed entries.
8. TDS by Multiple Deductors Not Reported Correctly
If you have earned income from multiple sources (e.g., freelance work, rental income, interest income), and one or more deductors have failed to report or misreported TDS, it could lead to inconsistencies in your Form 26AS versus your claimed amount.
How to Avoid a TDS Mismatch Notice
- Always verify that your PAN is correctly updated with all employers, banks, and other deductors.
- Before filing your ITR, download your latest Form 26AS from the TRACES portal to cross-check TDS entries.
- If you notice missing or incorrect TDS entries, follow up with the deductor before submitting your return.
- Use auto-populated data in online filing portals whenever possible to reduce manual entry errors.
- File your return in the correct assessment year, based on when the income was actually received and TDS was deducted.
- Avoid duplicate TDS claims across multiple years or revised returns.
Steps to Take After Receiving a TDS Mismatch Notice
1. Review the Notice Carefully
The notice will typically specify the mismatch amount and the nature of the discrepancy. Log in to your income tax account and download the detailed computation sheet from the e-filing portal to understand the issue.
2. Check Form 26AS and ITR Details
Compare the TDS amount in your ITR with the amount reflected in your Form 26AS. Any differences will point toward the source of the mismatch. If the TDS is missing in Form 26AS, contact the deductor immediately.
3. Communicate with the Deductor
Reach out to your employer, bank, or other deductor and request that they rectify any errors by revising their TDS return. The corrected details will be reflected in your Form 26AS once the revision is processed by the department.
4. File a Revised Return (if needed)
If the error was from your side such as incorrect entry or wrong assessment year you can correct it by filing a revised income tax return. Ensure that your corrected ITR matches your updated Form 26AS.
5. Respond to the Notice Promptly
If the notice includes a demand for additional tax, and you disagree with the demand, you can file a response online through the e-filing portal under the ‘e-Proceedings’ or ‘Response to Outstanding Demand’ section. Provide supporting documents such as Form 16, TDS certificates, or bank statements.
Understanding the common reasons for TDS mismatch notices helps taxpayers remain cautious and proactive. TDS plays a critical role in ensuring compliance with income tax laws, and any inconsistencies can delay refunds or even trigger tax demands. By cross-verifying TDS records with Form 26AS, ensuring accurate filing, and maintaining clear communication with deductors, you can minimize the chances of receiving a mismatch notice. If you do receive one, acting quickly and methodically will help resolve the issue without penalties or prolonged delays.