Excess TDS deposited due to double entry booked in TDS return

[milan bamal]

In the TDS return for FY 2025-26, Quarter 1, excess TDS credit was given to one deductee by mistake. Matter is that----TDS was to be deducted at 2% on Rs. 1,00,000, but instead it was deducted at 2% on Rs. 2,00,000. Even if the TDS return is revised, how can the benefit of the excess TDS deposited be claimed?

[YAGAY andSUN]

The issue concerns excess deduction and deposit of TDS for FY 2025-26 (Q1), where tax was deducted at 2% on Rs. 2,00,000 instead of Rs. 1,00,000, resulting in an excess deposit of Rs. 2,000. Under the Income Tax Act, 1961, such excess TDS can be regularized either in the hands of the deductee or the deductor, depending upon the corrective course adopted:

1. Revision of TDS Return: The deductor should file a correction statement rectifying the "amount paid/credited" to Rs. 1,00,000 and the corresponding TDS to Rs. 2,000.

2. Treatment of Excess TDS:

(a) Credit to Deductee (Practical Approach): If the deductor does not reduce the TDS amount in the correction statement (i.e., continues to report Rs. 4,000), the entire TDS will reflect in the deductee's Form 26AS. The deductee may then claim refund of the excess Rs. 2,000 while filing the return of income. This is administratively simpler and generally preferred where parties are aligned.

(b) Refund to Deductor: If the correction statement reduces the TDS to Rs. 2,000, the excess Rs. 2,000 remains as unclaimed balance with the government. In such cases, the deductor may seek refund through the prescribed mechanism under the Income Tax Department of India (TRACES/AO route). This typically requires supporting documentation such as indemnity bond, CA certificate, and confirmation that the deductee has not claimed the credit.

3. Compliance Considerations: Care must be taken to ensure consistency between the revised TDS return and the TDS certificate. Any mismatch may lead to reconciliation issues or denial of credit.

Our Final View: The excess TDS is recoverable, either by permitting the deductee to claim refund through their return of income, or by the deductor seeking refund post-correction, subject to procedural compliance.

Other experts' views are also welcomed!

AI Summary

Excess TDS correction through revised return, deductee credit, or deductor refund, with strict reconciliation requirements. Excess TDS arising from a double entry in the TDS return may be regularised by filing a correction statement and reconciling the credit reported for the deductee. If the excess credit continues to reflect in Form 26AS, the deductee may claim it in the return of income; if the corrected statement reduces the credit, the deductor may seek refund through the prescribed mechanism, subject to supporting documents and confirmation that the deductee has not claimed the credit. Consistency between the revised return and the TDS certificate is required.