TDS notices are among the most common compliance notices businesses receive from the Income Tax Department. Whether it is for non-deduction, short deduction, or late filing of TDS returns, I have helped hundreds of companies respond effectively to these notices in my career as a tax compliance specialist.
In this guide, I will explain the types of TDS notices, provide ready-to-use sample formats, and share practical tips to handle these notices efficiently.
A TDS (Tax Deducted at Source) notice is issued by the Income Tax Department when there are discrepancies or defaults related to TDS compliance. These notices are issued to deductors (employers, businesses) who fail to:
| Section | Notice Type | Reason | Consequence |
|---|---|---|---|
| Section 201(1) | Demand notice | Non-deduction or short deduction of TDS | Tax demand + Interest u/s 201(1A) |
| Section 201(1A) | Interest demand | Late payment of TDS | 1% per month (non-deduction) or 1.5% (late payment) |
| Section 206AA | Higher rate notice | TDS on invalid/absent PAN | TDS at 20% or applicable rate, whichever higher |
| Section 234E | Late filing fee | Delayed TDS return filing | Rs. 200 per day (max = TDS amount) |
| Section 271H | Penalty notice | Incorrect TDS statement | Rs. 10,000 to Rs. 1,00,000 |
| Section 272A(2)(k) | Penalty notice | Non-issuance of TDS certificates | Rs. 100 per day per certificate |
TDS notices are typically available on TRACES (TDS Reconciliation Analysis and Correction Enabling System):
Review the following details:
Cross-verify with your records:
Common reasons for TDS demands:
Based on the cause:
For written responses:
To, The Assessing Officer (TDS), Centralised Processing Cell (TDS), Income Tax Department, Ghaziabad Subject: Reply to Notice under Section 201(1) of Income Tax Act, 1961 Reference: - Notice No.: [XXXXX] - TAN: [XXXXX0000X] - Assessment Year: 2025-26 - Quarter: Q2 (July-September 2025) - Form Type: 26Q Respected Sir/Madam, With reference to the above notice demanding TDS of Rs. [XX,XXX] along with interest of Rs. [X,XXX], I submit my reply as under: 1. Nature of Default as per Notice: Short deduction of TDS on payment to M/s [Vendor Name] (PAN: XXXXX0000X) under Section 194C. 2. Our Submission: We respectfully submit that TDS was correctly deducted at 1% as the deductee is a company covered under Section 194C(1)(a). The rate of 1% is applicable for payments to companies. The demand raised appears to be due to system treating the deductee as an individual (2% rate) instead of a company. 3. Supporting Evidence: - Copy of vendor PAN card showing company status (Annexure A) - Ledger extract showing correct TDS deduction (Annexure B) - Challan copy showing TDS deposit (Annexure C) - Form 26AS of deductee showing TDS credit (Annexure D) 4. Prayer: In view of the above, we request your good office to drop the demand of Rs. [XX,XXX] as TDS has been correctly deducted and deposited. Date: [DD/MM/YYYY] Place: [City] [Authorized Signatory] [Name and Designation] TAN: [XXXXX0000X]
To, The Centralized Processing Cell (TDS), Income Tax Department, Ghaziabad Subject: Response to Intimation under Section 234E - Late Filing Fee Reference: - TAN: [XXXXX0000X] - Form: 24Q - Quarter: Q4 (January-March 2025) - Assessment Year: 2025-26 - Late Fee Demand: Rs. [X,XXX] Respected Sir/Madam, 1. We acknowledge the intimation regarding late filing fee under Section 234E for delayed filing of Form 24Q for Q4 of FY 2024-25. 2. The delay occurred due to [state genuine reason - e.g., technical difficulties on TRACES portal, change in authorized person, etc.]. 3. We accept the late filing fee of Rs. [X,XXX] and have deposited the same vide Challan No. [XXXXX] dated [DD/MM/YYYY]. Copy enclosed as Annexure A. 4. We request confirmation of receipt and closure of the default. Date: [DD/MM/YYYY] Place: [City] [Authorized Signatory] TAN: [XXXXX0000X]
Login to TRACES portal (tdscpc.gov.in) then Defaults then View Defaults. This shows all quarters with outstanding defaults. You can also download the Justification Report for detailed analysis. Additionally, check your e-Filing account under View Filed TDS section for any intimations.
TDS demand under Section 201(1) cannot be waived as it represents tax not deducted which belongs to the government. However, interest under Section 201(1A) may be partially reduced if you can prove reasonable cause. Penalty under Section 271C can be waived under Section 273A if genuine hardship is demonstrated.
If the deductee has already paid tax on the income where TDS was short-deducted, you can request the AO to not treat you as assessee in default under proviso to Section 201(1). You need to submit: (a) Certificate from deductee confirming tax payment, (b) Deductee Form 26AS showing tax payment, (c) Copy of deductee ITR acknowledging the income.
Consult a tax professional when:
TDS notices require prompt attention and accurate response. Most demands can be resolved through correction statements on TRACES or proper documentation. The key is to reconcile your records, identify the exact cause, and respond within timelines with supporting evidence.
If you have received a TDS notice and need expert assistance, our team specializes in TDS compliance and dispute resolution. Get professional notice support to ensure timely resolution and avoid unnecessary penalties.
Disclaimer: This article provides general guidance on TDS notices. For specific situations, consult a qualified tax professional.
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