A TDS challan deposited under FY 2025-26 can be used while filing a TDS statement for Tax Year (TY) 2026-27, according to a clarification from the Income Tax Department. But this is not the same as changing the year printed on the original challan—so deductors must follow the portal rules carefully.
The issue has become common because India has moved from the old “Assessment Year” system to the new “Tax Year” framework under the Income-tax Act, 2025. Many employers, businesses and accountants have accidentally selected the old year while depositing TDS for transactions after 1 April 2026.
Why the Year Confusion Started
Under the earlier Income-tax Act, 1961, income earned in FY 2025-26 was assessed in Assessment Year 2026-27. From 1 April 2026, however, the Income-tax Act, 2025 replaced the “previous year/assessment year” language with a single concept: Tax Year.
So, the two labels look similar but refer to different periods:
| Period | Applicable law | Correct label |
|---|---|---|
| 1 April 2025 to 31 March 2026 | Income-tax Act, 1961 | FY 2025-26 / AY 2026-27 |
| 1 April 2026 to 31 March 2027 | Income-tax Act, 2025 | FY 2026-27 / TY 2026-27 |
In simple terms, if TDS was deducted on a payment or credit made on or before 31 March 2026, the old Act applies. If the payment or credit happened on or after 1 April 2026, the new Act and TY 2026-27 framework apply.
What the Tax Department Clarified
The Income Tax Department said that a TDS challan deposited for FY 2025-26 may be utilised while furnishing a TDS statement for TY 2026-27. The relief is available within a plus or minus one Tax Year range, subject to the relevant system validations and challan conditions.
This matters because a deductor may have selected AY 2026-27 while paying TDS that actually related to a transaction under the new law. In such cases, the challan may still be usable against the TY 2026-27 statement, provided it is eligible and has an unconsumed balance.
However, this is not a blanket permission. The challan must match the required TAN, payment details, available balance and other portal checks. A challan that is already fully used cannot be used again.
Utilisation Is Not the Same as Correction
This is the most important point for businesses and tax professionals.
Cross-year utilisation means an eligible challan can be tagged or used against a TDS statement for an adjacent tax year. It does not necessarily rewrite the tax year recorded in the original challan.
Challan correction, on the other hand, means changing an incorrect detail in the challan itself—such as the tax year, assessment year or other particulars. The Department has said a dedicated facility for correcting challans across tax years was under development, but no confirmed launch date was given in the reported clarification.
| Particular | Cross-year utilisation | Challan correction |
|---|---|---|
| Main purpose | Use an eligible challan for a nearby tax year’s TDS statement | Correct an error recorded in the original challan |
| Does it change the original challan year? | Not automatically | May change it if the applicable facility allows it |
| Where handled? | Through the relevant TDS statement/TRACES process, subject to validations | Through TRACES or the Assessing Officer for TDS/TCS challans |
| Key caution | Only eligible challans with available balance can be used | TDS/TCS challans are not corrected through the regular e-filing challan-correction facility |
A Simple Example
Suppose ABC Pvt Ltd deducts TDS in April 2026 on a payment covered by the Income-tax Act, 2025. While making the deposit, its accounts team mistakenly selects the old-year option and pays the challan under FY 2025-26 / AY 2026-27.
Later, while preparing the TDS statement for TY 2026-27, the company notices that the challan does not match the reporting year. In this situation, the Department’s clarification may allow the eligible FY 2025-26 challan to be used for the TY 2026-27 statement, within the permitted one-year range and subject to portal validation.
If the system rejects the utilisation, the company should not assume the challan has been corrected. It should check the challan details, reconcile the statement and use the applicable TRACES correction process or seek guidance from the concerned authority.
What TRACES Currently Allows
TRACES provides an online correction facility for TDS/TCS statements, including certain challan and PAN-related corrections, without requiring the deductor to download the consolidated file in every case.
For more extensive corrections, deductors may need to download the consolidated TDS/TCS file, prepare a correction statement, validate it through the File Validation Utility and submit it through the prescribed channel.
The regular e-filing portal’s challan-correction facility is different. It explicitly states that TDS/TCS challans cannot be corrected through that facility; such corrections must be handled through TRACES or by contacting the Assessing Officer.
Steps Deductors Should Take Now
- Confirm the correct law first. Check whether the TDS payment or credit occurred before or after 1 April 2026; this decides whether the 1961 Act or the 2025 Act applies.
- Check the challan carefully. Verify TAN, amount, payment date, challan identification number, selected year and available balance before using it in a statement.
- Reconcile every quarter. Match challans with TDS statements and investigate unmatched or unconsumed amounts immediately.
- Do not treat utilisation as correction. Using a challan for TY 2026-27 does not automatically change the year recorded in the original challan.
- Watch official TRACES updates. The dedicated cross-tax-year correction facility was reported as under development, so deductors should rely only on the latest official portal instructions.
- Keep a clean record. Preserve challan receipts, statement acknowledgements, reconciliation sheets and any communication with the tax department.
- Update payroll and accounting systems. Teams should be trained to choose the correct Tax Year for transactions from 1 April 2026 onwards.
Key Takeaway
The clarification offers practical relief to deductors who selected the wrong year during the transition to the Income-tax Act, 2025. An eligible TDS challan paid under FY 2025-26 can be used for a TY 2026-27 TDS statement within the permitted ±1 Tax Year range.
But the relief has limits. It does not automatically correct the original challan, nor does it remove the need for accurate TDS reporting. Until a dedicated cross-year correction facility is officially live, businesses should verify portal functionality, reconcile payments promptly and avoid duplicate payments without checking the available options.
Disclaimer: This article is for general information only and is not personalised tax advice. TDS rules and portal facilities can change, so confirm the latest official Income Tax Department and TRACES instructions before taking any action.