• Notification Date: 23-03-2023
• Notification No: N/A

Income Tax TDS Credit Claim Issue regarding ITR-Form 26AS-AIS Mismatch

Sometimes, a taxpayer is asked to pay 60% tax on your income despite your effective tax liability being only 30% if there is a discrepancy between the TDS credit claimed in their ITR and 26AS. For example, if a salaried individual receives their salary after the TDS deduction but the TDS deducted by their employer is not paid to the government, the TDS returns may not be filed by the employer. In such a case, when the employee files their Income Tax Return, the TDS deducted by the employer will not be reflected in their 26AS/AIS/TIS. In such a scenario, the employee then has two options. 

Pay the Income tax again: If the employee doesn’t claim the TDS credit while filing the ITR, they will have to pay Income Tax again on the Salary Income. This will result in double taxation. Claim the TDS Credit even if not reflected in 26AS: The employee can manually claim the TDS credit while filing their ITR, even if it is not reflected in 26AS, AIS or TIS. However, this may lead to a notice from CPC for a “mismatch in TDS credit”, which will require the taxpayer to provide conclusive evidence that TDS has been deducted from the income in question. The taxpayer can then claim the remedy under Section 205 of the Income Tax Act during litigation before the tax authorities. In such a scenario, it is important to refer to Section 205 of the Income Tax Act 1961. Section 205 of the Income Tax Act prohibits the Income Tax officer from collecting tax on income from which TDS has already been deducted. Therefore, if a taxpayer has evidence to show that TDS has already been deducted on a particular income, they can manually claim the TDS credit while filing their ITR, even if the credit is not reflected in 26AS. 

There are various judgments issued by Income Tax Appellate Tribunals and High Courts, wherein the tax officers were directed to collect the Income Tax from the TDS deductor rather than collecting the Tax from an employee or Income recipient (who earned income after the TDS deduction).