A TDS demand notice tells you an amount and nothing else. It does not say which quarter, which deductee, or what went wrong. That information exists, in a report you have to go and ask for.
The Justification Report on TRACES lists every default in a filed TDS statement, row by row — short deduction, short payment, late deduction, late payment and the interest on each. It is downloadable once a statement shows as Processed with Default, and it is the only practical way to know what a demand is actually for.
TDS demand with no explanation? WhatsApp us the quarter and the TAN and we will tell you what to look for.
Quick Summary — Common Defaults
| Default | What it means | Usual fix |
| Short deduction | Less TDS deducted than the section requires | Deposit shortfall with interest, then correct |
| Short payment | Deducted but not fully deposited, or challan mismatch | Map or add the challan |
| Late deduction | Deducted after the payment or credit date | Pay interest under 201(1A) |
| Late payment | Deposited after the due date | Pay interest under 201(1A) |
| Late filing fee | Statement filed after the due date | Section 234E fee, payable |
| PAN error | Invalid or mismatched PAN | PAN correction, DSC required |
💡 TaxKitab Tip Check the Defaults tab on TRACES quarterly, whether or not a notice has arrived. Demands sit on the portal and accrue interest without anything landing in your inbox, and plenty of deductors discover a four-year-old short deduction only when a deductee complains their credit is missing from Form 26AS. A two-minute look at the dashboard each quarter catches these while they are still small and still correctable. — Default codes and the correction sequence are set out section by section in our TDS & TCS Complete Guide (Rs 249)
Downloading the Report
Log in to TRACES with your TAN credentials. The statement must show as Processed with Default — if it processed without default, no report exists, which is itself the answer.
Request the Justification Report for the relevant form and quarter, entering the token number of the most recent statement or correction for that period. The request takes time to process; the file becomes available once the status shows as Available.
It downloads as a text file that opens in Excel, with each default on its own row.
Reading It
The report is organised by default type, and each row names the deductee, the amount involved and the shortfall.
Short deduction means less tax was deducted than the applicable section required. The most frequent cause is a PAN that was invalid or not available, which triggers deduction at the higher rate — and if the correct PAN was not quoted, the system computes the shortfall accordingly.
Short payment usually means a challan mismatch rather than money genuinely missing. The amount was deposited, but the challan was not mapped correctly in the statement.
Late deduction and late payment are interest items under Section 201(1A), running from the date the deduction or deposit should have happened.
Late filing fee under Section 234E applies where the statement itself was filed after the due date, and it is not waivable in the ordinary course.
Fixing Each One
The sequence matters, and getting it wrong creates a fresh default.
Where there is a genuine shortfall of tax, deposit it first with a new challan, including interest under Section 201(1A). Only then file the correction mapping that challan to the affected rows. Increasing a deductee’s TDS in a correction without a matching challan deposit produces an immediate short-payment default.
Where the issue is a challan mismatch, no money is needed. Map or add the existing challan in the correction statement.
PAN corrections require a Digital Signature Certificate; challan corrections generally do not.
Filing the Correction
Corrections are filed on TRACES, either through the online correction facility or by downloading the Consolidated File, preparing the correction offline, validating it and uploading.
Online correction handles most situations and is faster. The offline route is used where the change is extensive.
After upload, record the token number and monitor the processing status. A correction can itself be processed with default, so the job is not finished when the statement is submitted.
Once processed, regenerate Form 16 or 16A for the affected deductees, since the certificates carry the earlier figures until they are reissued.
The Time Limit
Correction statements now carry a statutory time limit of two years from the end of the relevant financial year. After that, a correction cannot be filed at all.
That is a change worth planning around. A default discovered three years later may no longer be correctable, which leaves the demand standing and the deductee’s credit permanently blocked.
Check the Defaults tab on a schedule rather than waiting for a notice.
Why It Matters Beyond the Demand
An unresolved default is not only your problem. Until the correction is filed, the deductee’s credit stays blocked in Form 26AS and AIS.
For employees that means a mismatch between Form 16 and TRACES, and a refund that does not arrive. For vendors it means chasing you rather than the department.
Frequently Asked Questions
What is the Justification Report? A row-by-row listing from TRACES of every default in a filed TDS statement, including short deduction, short payment, late deduction, late payment and interest.
Why does my demand notice not say what is wrong? It does not carry the detail. The Justification Report is where the reason sits, and it has to be requested separately.
The report is not available. Why? It only exists where the statement was Processed with Default. If it processed clean, there is nothing to download.
Do I pay first or correct first? Pay first where tax is genuinely short. Correcting without a matching challan deposit creates a fresh short-payment default.
Does a correction need a DSC? PAN corrections do. Challan corrections generally do not. Check the requirement for your specific correction type.
How long do I have to file a correction? Two years from the end of the relevant financial year. After that the correction cannot be filed.
My deductee says the credit is missing from 26AS. That is usually an open default on your side. Clear it and the credit flows through once the correction is processed.
References
- Income-tax Act — Sections 201(1A) interest and 234E late filing fee
- TRACES portal guidance on Justification Report download and online correction
- Statutory time limit for furnishing correction statements
⚠️ Correction procedures, time limits and DSC requirements have changed under the Income-tax Act, 2025 and continue to be clarified. Verify the current position on traces.gov.in or with your advisor before filing.
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