Short tds deduction

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 September 2013 our is public ltd co we have deducted TDS on contractor for comapny & firm deductee @1% i.e short deduction of 1%. whether such amount is disallowed under income tax. If we paid before the due date of efiling retrun whether it is admissible.And if we paid the same before the due date of efiling retrun in which year we have to shown the same in quarterly eTDS return. pls guide

Querist : Anonymous

Querist : Anonymous (Querist)

16 September 2013 our is public ltd co we have deducted TDS on contractor for comapny & firm deductee @1% i.e short deduction of 1%. whether such amount is disallowed under income tax. If we paid before the due date of efiling retrun whether it is admissible.And if we paid the same before the due date of efiling retrun in which year we have to shown the same in quarterly eTDS return. pls guide

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2025 Here’s a clear explanation on your query about short TDS deduction on contractor payments:

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### 1. **Short Deduction of TDS**

You deducted TDS @1% on payments to contractors (companies/firm) where the correct rate was 2%, so you have short deducted 1%.

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### 2. **Tax Disallowance Under Income Tax Act**

* **Section 40(a)(ia)** provides that if tax is deductible at source but not deducted or deducted short, the corresponding expense will be **disallowed** while computing taxable income.
* However, if you deposit the shortfall (1% here) **before the due date of filing the Income Tax Return (ITR)**, then this disallowance is **not applicable**.
* So, if you pay the short deducted TDS before filing ITR, the expense remains allowable.

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### 3. **Timing of Payment and Return Filing**

* If you deposit the shortfall TDS before the ITR filing deadline (typically 31st July for individuals or 30th September for companies for the previous year), you can claim the expense.
* You should show the **short-deducted TDS payment in the TDS return of the quarter in which the payment is actually made**.
* Example: If you paid the short TDS in July 2013 for FY 2012-13, then show it in the TDS return of the quarter April-June or July-September 2013, whichever is relevant for the payment date.

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### 4. **Best Practices**

* Pay the balance TDS (the shortfall) with interest (if applicable) immediately after detecting the short deduction.
* File a **correction/revised TDS return** for the quarter where short TDS was deducted to reflect the correct amount.
* Maintain proper documentation of payment challans.

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### Summary Table:

| Issue | Position |
| ------------------------------- | ------------------------------------------------------------ |
| Short TDS deduction disallowed? | Disallowed under Sec 40(a)(ia) if not paid before ITR filing |
| Payment before ITR due date | Expense allowed; no disallowance |
| Reporting in TDS return | Report in quarter when balance TDS is actually deposited |
| Interest on late payment | Pay interest under Sec 201(1A) for late payment of TDS |

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If you want, I can help you draft a letter to your tax consultant or help you with filing the revised TDS return. Need assistance?

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