Form 26A for TDS Demand: Short, Non-Deduction & PAN
Form 26A is a CA certificate used when TDS was not deducted or was short deducted, but the deductee has already filed income tax return and included that income. It can help remove the tax demand from the deductor, but interest under section 201(1A) may still remain payable.
- What is Form 26A?
- When is Form 26A used?
- Inoperative PAN and 20% TDS demand
- Revised TDS return may not fix default
- What relief does Form 26A give?
- What if deductee has not filed ITR?
- Details required from deductee
- Important: Amount Matching in Form 26A
- Interest under section 201(1A)
- Step-by-step procedure
- Is UDIN required?
- Common mistakes to avoid
- No PAN in TDS return – how to handle
- FAQ
1. What is Form 26A?
Form 26A is an accountant certificate used in TDS default cases. It is mainly used when the deductor has not deducted TDS or has deducted less TDS, but the deductee has already offered that income in the income tax return.
In simple words, Form 26A tells the department:
However, Form 26A does not automatically remove interest. Interest under section 201(1A) may still be payable.
2. When is Form 26A used?
Form 26A is useful in cases like:
- TDS not deducted (non-deduction), where the deductee is reported in the TDS return but TDS is shown as NIL and a demand is raised. If the demand is correct, the deductor may either pay the demand or use Form 26A. If the demand arises due to an error in the TDS return, the return should be corrected.
- TDS not deducted (non-deduction), where the deductee is not reported in the TDS return or no TDS return was filed — in such cases, Form 26A is not applicable unless a default is first created. The deductor must file or correct the TDS return and then proceed based on the resulting demand.
-
Short deduction of TDS, including:
- Deduction at a lower rate
- Inoperative PAN (higher rate applicable)
- PAN not furnished or incorrect/invalid (higher rate such as 20% applicable) — Form 26A can be applied after correcting PAN details in the TDS return
- Short deduction defaults as reflected in TRACES justification report
In most practical situations, TDS defaults broadly fall into two categories — non-deduction or short deduction. Factors like lower deduction rate, inoperative PAN or invalid PAN typically lead to short deduction.
Form 26A applies only where a TDS default exists in the system. If the transaction is not reported, it must first be brought into the TDS return before considering Form 26A.
3. Inoperative PAN and 20% TDS Demand
In many cases, deductors deducted TDS at the normal rate, for example 1% under section 194C. Later, the department treated the deductee PAN as inoperative because PAN was not linked with Aadhaar.
In such cases, the system may calculate TDS at 20% and raise short deduction demand.
Example
| Particulars | Amount |
|---|---|
| Payment to contractor | ₹3,00,000 |
| TDS deducted at 1% | ₹3,000 |
| TDS calculated by department at 20% | ₹60,000 |
| Short deduction demand | ₹57,000 |
If the deductee has filed ITR and shown this income, then Form 26A may help reduce the tax demand.
While this example focuses on inoperative PAN, similar TDS demands can also arise due to short deduction or non-deduction of TDS in other situations.
Form 26A is not limited to PAN-related issues. It can also be used in cases where TDS was deducted at a lower rate or not deducted at all, provided the deductee has filed the return and included the income.
4. Important: Revised TDS Return May Not Remove This Default
If the TDS return was filed at a time when the deductee’s PAN was inoperative, the system may calculate TDS at a higher rate, such as 20%.
Later, even if the PAN becomes valid and you file a revised TDS return, the earlier short deduction default may still remain.
Because the system generally checks PAN status at the time of deduction or payment, not only the later PAN status.
So, if PAN was inactive at the time of payment, higher TDS may be treated as applicable. Later activation of PAN does not automatically remove the old TDS default.
In such cases, Form 26A may be the correct solution instead of filing repeated revised TDS returns.
Later activation of PAN does not automatically remove earlier TDS default.
5. What Relief Does Form 26A Give?
The biggest benefit of Form 26A is that the tax demand may be removed if the deductee has already included the income in the return.
| Component | Effect after Form 26A |
|---|---|
| Short deduction tax demand | May be removed |
| Interest under section 201(1A) | Still payable |
| Revised TDS return | Usually not required only for 26A relief |
Form 26A can save the deductor from paying the tax amount again, but it does not remove interest.
6. What if Deductee Has Not Filed ITR or Income Is Not Included?
One of the key conditions for using Form 26A is that the deductee must have filed the income tax return and included the relevant income.
Case 1: Deductee has not filed ITR
- Form 26A cannot be applied directly
- The deductee must first file ITR or ITR-U, if eligible
Filing ITR-U may enable Form 26A, as the deductee would then have filed the return and included the income. However, delay increases interest under section 201(1A), since interest runs up to the date of filing of return by the deductee.
Case 2: ITR filed but income not included
- Form 26A cannot be applied unless the income is properly reported
- The deductee must revise the return or file ITR-U (if applicable) to correct the income details
Filing ITR is not enough — the specific income on which TDS was applicable must also be included in the return.
If income is within rebate limit
If the deductee’s total income is within the rebate limit and tax payable is nil, Form 26A may still be possible, provided the return is filed and the income is included.
In such cases, the deductee may mainly incur late filing fees or other applicable compliance costs, depending on the facts.
After correction
- Once ITR is filed or corrected
- And income is properly included
- Form 26A can then be applied
No ITR or income not reported → Form 26A not possible
7. Details Required from Actual Deductees
Before proceeding with Form 26A, collect proper details from each deductee. Do not rely only on verbal confirmation.
Basic details
- PAN of deductee
- Name as per PAN
- Assessment year
- Mobile/email for coordination, if needed
ITR details
- ITR acknowledgement number
- Date of filing of ITR
- Copy of ITR-V / acknowledgement
- Computation of income
Income verification
- Amount received from deductor
- Nature of income, such as contract payment, professional fee, commission, etc.
- Confirmation that the income has been included in ITR
- Ledger, invoice, or payment detail, if available
Tax details
- Tax paid challan, if tax was payable
- Form 26AS / AIS, if needed
- If tax payable is nil, computation showing nil tax liability
ITR acknowledgement + computation of income + confirmation that relevant income is included.
Important: Amount Matching in Form 26A
One of the most common reasons for rejection or partial relief in Form 26A is mismatch of income amounts between the deductor’s records and the deductee’s ITR.
For Form 26A to be successfully applied, the gross amount paid by the deductor should be identifiable in the deductee’s income reported in the return.
How matching works
- If you paid a contractor ₹1,00,000, the deductee’s ITR should reflect at least ₹1,00,000 (or more) under the relevant head of income such as business or professional income
- If the deductee reports a lower amount, the CA cannot certify that the full income has been included
What happens in case of mismatch
- Form 26A may be accepted only partially
- The demand may be reduced only to the extent of income reported
- The remaining demand may still continue
The CA certifies that the income on which TDS was applicable has been included in the deductee’s return. If the amounts do not match, full certification may not be possible.
Payment made by deductor ≈ Income reported by deductee
It is advisable to verify the deductee’s computation before proceeding with Form 26A.
In practical cases, differences may arise due to expenses, netting off, or accounting treatment. However, for Form 26A certification, the CA must be reasonably satisfied that the gross receipts corresponding to the payment are reflected in the deductee’s return.
8. Interest under Section 201(1A)
This is the most important calculation in Form 26A cases.
Rate of interest
For non-deduction or short deduction, interest is generally calculated at 1% per month or part of a month.
On which amount?
Interest is calculated on the short deducted amount.
Required TDS = ₹60,000
Actual TDS deducted = ₹3,000
Short deduction = ₹57,000
Interest will be calculated on ₹57,000.
From which date to which date?
In Form 26A relief cases, interest is generally calculated:
- From: Date on which TDS was deductible
- To: Date of filing of return of income by deductee
If deductee files ITR-U very late, interest under section 201(1A) also runs till that later ITR filing date. So tax demand may reduce, but interest may become higher.
Simple formula
Example with delay
Suppose short TDS is ₹1,29,545 and payment was made in March 2024. If deductees file return in May 2026, then interest may run for around 26 to 27 months, depending on exact dates and system calculation.
Approx calculation:
Even then, Form 26A may still be beneficial if the original demand is much higher.
9. Step-by-Step Procedure for Form 26A
The Form 26A process generally involves both TRACES and the Income Tax e-filing portal.
Step 1: Login to TRACES
Login as deductor on TRACES using TAN credentials.
Step 2: Go to Statements / Payments
In many TRACES layouts, the option is available under:
Do not confuse this with Demand Management. Demand Management is generally for demand handling/payment type action. For Form 26A, use the specific 26A/27BA request option.
Step 3: Select financial year, form type and transaction
Select the relevant financial year, quarter and form type such as 26Q.
Step 4: TRACES generates DIN
For short deduction transactions, TRACES generates a unique DIN. For non-deduction transactions, alpha-numeric strings may be generated.
Step 5: Go to Income Tax e-filing portal
The next stage happens on the Income Tax e-filing portal. The deductor locates the relevant DIN and selects it for Form 26A action.
Step 6: Assign CA / Accountant
Deductor enters the membership number of the accountant who will certify Annexure A of Form 26A.
Step 7: CA certifies Annexure A
The CA logs in to the e-filing portal, opens the assigned Form 26A request, fills relevant deductee details and digitally signs Annexure A.
Step 8: Deductor final submission
After CA certification, deductor needs to digitally sign and submit the final Form 26A request.
Step 9: Demand gets recalculated
After processing, short deduction tax demand may be reduced or removed. Interest under section 201(1A) may remain payable.
10. Is UDIN Required for Form 26A?
Yes, UDIN is required because Form 26A involves CA certification.
The CA should generate UDIN for the certificate / Annexure A certification and keep it properly linked or updated as required on the portal.
Keep UDIN ready at the time of CA certification. Do not treat Form 26A as a casual form filling exercise because it is a professional certificate.
11. Common Mistakes to Avoid
- Assuming revised TDS return will automatically remove 20% demand
- Not checking whether deductee has filed ITR
- Proceeding without computation of income
- Not checking whether income is actually included in deductee’s return
- Using Demand Management instead of Form 26A request
- Forgetting that interest under section 201(1A) still remains payable
- Ignoring UDIN requirement
- Assuming one Form 26A covers all deductees
Usually, Form 26A is PAN-wise / deductee-wise. If there are 3 deductees, practically 3 separate Form 26A certifications may be required.
12. What if No PAN Was Furnished or Deductee Was Not Reported in TDS Return?
In some cases, the TDS return is filed without a valid PAN, such as “PANNOTAVBL”, blank, or incorrect PAN. In other situations, the deductee may not be reported at all, or the TDS return itself may not have been filed.
In all such cases, the transaction is not properly linked to a specific deductee in the system.
Can Form 26A be used?
Form 26A can be used only after the transaction is properly reported and linked to the deductee in the TDS system.
Form 26A cannot be applied on blank or invalid PAN, or where the deductee is not reported. The transaction must first be linked to the deductee.
Step 1: Ensure proper reporting in TDS return
- If PAN is missing or incorrect → file a TDS correction return and update the correct PAN
- If deductee is not reported → file a correction return and add the deductee details
- If TDS return is not filed → file the TDS return first
What happens after correction?
- The transaction gets linked to the deductee’s PAN
- The default becomes visible in TRACES
- Short deduction or non-deduction is identified
- Form 26A can then be applied
If not corrected
- No proper linkage with deductee
- No connection with deductee’s ITR
- Form 26A cannot be processed
Special situations
Case A: TDS already deducted @20%
- No short deduction
- Form 26A usually not required
Case B: TDS deducted at lower rate
- Short deduction arises
- Form 26A becomes useful after correction
No PAN, no reporting, or no TDS return → first create proper entry in system → then apply Form 26A
FAQ on Form 26A
1. Does Form 26A remove full TDS demand?
It may remove the tax portion of short deduction demand if conditions are satisfied. But interest under section 201(1A) generally remains payable.
2. Is revised TDS return required before Form 26A?
Not always. If PAN, amount and section are already correct, and the only issue is short deduction due to higher rate, Form 26A may be the proper route.
3. What if PAN became operative later?
If PAN was inoperative at the time of deduction, the system may still calculate higher TDS. Later validation does not always remove past default automatically. Form 26A may be considered if deductee filed ITR and included income.
4. Can Form 26A be filed if deductee has no tax payable?
Yes, if deductee has filed ITR, included the income and tax liability is correctly computed as nil.
5. What if deductee has not filed ITR?
Then Form 26A cannot be completed practically. Deductee may need to file ITR-U if eligible.
6. Does ITR-U increase interest?
Yes, for deductor-side interest under section 201(1A), the period may run up to the date on which deductee files return. If ITR-U is filed late, interest period becomes longer.
7. Is UDIN required?
Yes. Since Form 26A is a CA certification, UDIN should be generated and complied with properly.
8. Where is Form 26A option found on TRACES?
In many cases, it is available under Statements / Payments as Request for 26A / 27BA. The exact menu may vary depending on portal layout.
9. Is Form 26A useful for inoperative PAN cases?
Yes, it can be useful where short deduction demand has been raised and deductee has filed ITR including that income.
10. Who finally submits Form 26A?
CA certifies Annexure A, but after that deductor also needs to digitally sign and submit the final request.
11. Will revising TDS return remove default caused by inoperative PAN?
Not always. If PAN was inoperative at the time of deduction, the system may still treat higher TDS as applicable. Revising the return after PAN becomes valid does not automatically remove the earlier default.
12. Can Form 26A be used if PAN is missing or incorrect in TDS return?
Not directly. The deductor must first file a correction return and update the correct PAN. Once the transaction is properly linked to the deductee, Form 26A can be applied.
13. Can Form 26A be used if TDS return was not filed?
No. The TDS return must be filed first so that the transaction appears in the system. Form 26A can be applied only after the default is created and linked to the deductee.
14. What if deductee was not reported in TDS return?
In such cases, Form 26A cannot be applied directly. The deductor must file a correction return and include the deductee details before proceeding.
15. Can Form 26A be used if no TDS was deducted?
Yes, Form 26A can be used in non-deduction cases, provided the transaction is reported in the TDS return and the deductee has filed ITR including the relevant income.
16. Can Form 26A be used if deductee files return after notice?
Yes, Form 26A can still be applied if the deductee files the return later (including ITR-U), provided the income is included. However, interest under section 201(1A) will run till the date of filing.
17. What if return is filed but income is not included?
In such cases, Form 26A cannot be applied unless the deductee revises the return or corrects the income details.
Final Summary
If a TDS demand arises due to short deduction or non-deduction, do not directly pay the full amount. First check whether the deductee has filed ITR and included the income. If yes, Form 26A can help remove the tax demand. However, interest under section 201(1A) will still remain payable.
Disclaimer: This article is for general educational understanding. Actual treatment may differ based on facts, portal status, dates, assessment year and applicable law.
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