Request for Clarification on TDS Treatment for Backdated Invoice, Income Tax

[Ramanathan Seshan]

We seek your guidance on the following matter:

Company A has recently received an invoice from Company B on 11.04.2025, during FY 2025-26. However, the invoice is dated 01.06.2023, which pertains to FY 2023-24. Company B had failed to raise this invoice earlier due to an oversight identified during their internal reconciliation and has only now issued it.

Company A had not recorded any provision for this expense in FY 2023-24, nor does it have any excess provision available. Consequently, Company A has decided to deduct TDS in the current month and report it in the TDS return for Q1 of FY 2025-26.

In this context, we request your views on the following queries:

1. Is it appropriate to report the TDS deduction in Q1 of FY 2025-26, or should it be reported under FY 2023-24? If reported in FY 2023-24, would the challan need to be paid along with applicable interest for the delay in deduction?

2. If the TDS is deducted and reported in FY 2025-26, how can Company B claim the TDS credit when the corresponding income pertains to FY 2023-24?

3. If Company A decides to revise its return for FY 2023-24 and reflect the TDS in that year, Company B may not be able to claim the credit since the window for revising the ITR has closed. Can Company B utilize Form 71 to transfer the credit, or is there an option to approach the Assessing Officer for a manual adjustment or refund? Additionally, if a refund has already been processed, what remedies are available in this case?

4. Can Company B offer the same to tax this year and take tax credit for the same even though the same has not been offered in the earlier tax period?

Regards,

S Ram

Posts / Replies

[YAGAY andSUN]

This is a nuanced situation involving TDS timing, claim of credit, and inter-period mismatches between deduction and income recognition. Let's address your queries point by point with reference to the Indian Income Tax Act and practical considerations:

1. Is it appropriate to report the TDS deduction in Q1 of FY 2025-26, or should it be reported under FY 2023-24?

Since Company A did not record any provision or expense in FY 2023-24 and the invoice was only received in FY 2025-26, the liability to deduct TDS arises now, i.e., at the time of credit or payment, whichever is earlier, as per Section 194C/194J/194H, etc. (depending on the nature of expense).

Therefore, Company A is correct in deducting and reporting TDS in Q1 of FY 2025-26.

Interest under Section 201(1A) is not applicable because there was no liability to deduct TDS in 2023-24, as the invoice wasn't received nor was any provision made.

2. If reported in FY 2025-26, how can Company B claim the TDS credit when income pertains to FY 2023-24?

This is a common timing mismatch issue.

Company B can claim TDS credit only in the year in which the income is offered to tax, as per Rule 37BA(3)(i).

So:

• If Company B did not offer the income in FY 2023-24, but instead offers it in FY 2025-26, it can claim TDS credit in FY 2025-26 (AY 2026-27).
• However, if Company B already offered this income in FY 2023-24 and the ITR is processed/finalized, there will be a mismatch and credit will not reflect automatically in the 26AS/statement for that year.

3. Can Company B revise the return or use Form 71?

• Revising Return: As per current rules, returns for FY 2023-24 (AY 2024-25) can no longer be revised after 31.03.2025, so that’s not an option anymore.
• Form 71 (introduced w.e.f. 01.10.2023): This allows a deductee (Company B) to request the credit of TDS to be shifted to the correct financial year when TDS was deducted in a later year, but income was already offered earlier.

Yes, Form 71 is applicable in this case, assuming Company B has already offered the income in FY 2023-24.

• • This must be filed within 2 years from the end of the financial year in which TDS was actually deducted.
  • So, since deduction is in FY 2025-26, Form 71 can be filed up to 31.03.2028.
• Manual adjustment by AO: If Form 71 does not resolve the issue or if CPC rejects it, Company B may approach the Assessing Officer with a letter and supporting documents (invoice, ledger, TDS certificate, ITR, etc.) to request a manual credit grant or rectification.

4. If a refund has already been processed for FY 2023-24 by Company B, what are the remedies?

If Company B has already claimed a refund and now gets additional TDS credit (via Form 71 or otherwise), the only option is to seek rectification under Section 154 or approach the AO to reprocess the return and grant appropriate credit.

However, if Company B didn’t offer this income earlier, then it should:

• Offer the income now in FY 2025-26, and
• Claim TDS credit in the same year — which aligns correctly under Rule 37BA.

5. Can Company B offer the income in FY 2025-26 and claim TDS now?

Yes — this is the cleanest and most straightforward approach if:

• Company B had not shown the income in earlier years, and
• Now recognizes it in FY 2025-26 upon raising the delayed invoice.

TDS credit and income both fall in the same FY, so no mismatch or reconciliation hassle arises.

Summary:

Query	Recommendation
TDS Deduction Year	FY 2025-26 (correct as per law)
TDS Interest	Not applicable
Company B: Claimed income in FY 2023-24?	Use Form 71 to shift credit to that year
Company B: Didn't claim earlier?	Show income in FY 2025-26 and take credit now
Refund already processed?	Seek rectification (Sec 154) or approach AO
Manual recourse	Approach AO with evidence if Form 71 fails

Disclaimer: The above views are based on the provisions of the Income Tax Act, 1961, rules, and circulars available as of the date of this note, along with practical interpretations thereof. This response is intended for general informational purposes only and should not be construed as professional tax advice or a legal opinion. Tax positions may vary depending on specific facts and circumstances, and the final treatment may also depend on the assessment by the Income Tax Department or the view taken by the Assessing Officer. Stakeholders are advised to consult their tax advisors or legal counsel before taking any action based on the above information. Neither the author nor the issuer of this note accepts any liability for any loss or damage arising from reliance placed on the contents of this note.

[Manish Kumar]

1.    Report in Q1 TDS return of FY 2025-26.
2.    Company can claim credit by filing form 71.
3.    Form 71 to be filed online.
4.    Not required.