TDS Defaults on TRACES: Short Payment, Short Deduction and How to Fix Them

After you file a TDS return, the system processes it and flags 'defaults' on TRACES, usually with a demand attached. The numbers can look alarming, but many defaults come from data errors rather than unpaid tax. This guide explains the common types and how to fix them.

Where to Find Defaults

Log in to TRACES with your TAN and check the default summary for each statement. Download the justification report, which explains each default line by line.

Short Payment

The TDS reported in the return is more than the challans matched to it. Usual causes:

• A challan paid under the wrong section or for the wrong quarter.
• A challan not tagged to the return at all.
• A typing error in the challan details in the return.

Fix: a correction statement re-tagging the challans correctly. If tax genuinely wasn't paid, pay it with interest.

Short Deduction

Tax was deducted at a lower rate than the system expects. Usual causes:

• The payee's PAN was invalid or wrong, so the system expects the higher no-PAN rate.
• The payment was reported under the wrong section.
• A lower deduction certificate wasn't quoted.

Fix: correct the PAN or section through a correction statement, or pay the shortfall if the deduction really was too low.

Interest on Late Deduction or Payment

Tax was deducted or deposited after the due date. This is usually a genuine liability and should be paid.

Late Filing Fee

A fee for each day the return was late, up to the amount of TDS. It's a genuine liability, unless the return was actually filed on time and the system has the wrong date.

Why Fix Defaults

• Outstanding demands can be adjusted against income-tax refunds.
• Payees don't get credit for tax affected by PAN errors.
• Open defaults show up in due diligence.

Getting Help

Think Filing analyses TRACES defaults, files correction statements, and clears demands for businesses.