Defaults, interest & notices
10 common TDS questions on defaults, interest & notices, answered by a CA firm and kept current for FY 2026-27.
What interest do I pay if I deposit TDS late?
1% per month for late deduction and 1.5% per month for late deposit, under Section 201(1A), counted for every month or part of a month.…
What is the late-filing fee under Section 234E?
₹200 for every day the TDS return is late, capped at the total TDS in that statement.…
I received a short-deduction default on TRACES — what should I do?
Download the justification report, find the cause (usually a PAN error or wrong rate), deposit any shortfall with interest, and file a corre…
What is a TDS justification report and how do I read it?
It is a TRACES report that lists every default in a processed statement — short deduction, short payment, late deduction, late payment and l…
Can my expenses be disallowed if I don't deduct TDS?
Yes — 30% of a payment to a resident is disallowed if TDS is not deducted or not deposited in time; 100% of certain payments to non-resident…
How do I correct a wrong challan or PAN in a filed TDS return?
File an online correction on TRACES — PAN corrections and challan tagging/movement can be done without revisiting the bank in most cases.…
What is the penalty for not deducting TDS at all?
You are treated as an assessee-in-default — liable for the tax, 1% per month interest, a penalty equal to the tax not deducted, and 30% expe…
I deducted TDS but the deductee says it is not in their 26AS / Form 168 — why?
Almost always because the deductee's PAN was wrong in the return, the challan is unmapped, or the return is unfiled/unprocessed — fix it wit…
What is a lower/nil deduction certificate under Section 197 and how do I use it?
It is a TRACES certificate that lets you deduct TDS at a lower or nil rate for a specific deductee; validate it on TRACES and apply the cert…
Is the interest paid on late TDS deposit allowed as a business expense?
No — interest under Section 201(1A) on delayed TDS is not deductible as a business expense.…
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