Guidance Needed: TDS Filed Under Wrong Company – How to Transfer Credit from Company A to Company B?, Income Tax

[Ramanathan Seshan]

Dear Experts,

We’re facing an issue where a customer has mistakenly filed TDS in the name of Company B, although the purchase and transaction were actually made with Company A. As a result, the TDS credit is reflecting in Company B’s Form 26AS instead of Company A’s.

Is there a way to rectify this and transfer the TDS credit from Company B’s 26AS to Company A’s? What is the appropriate process or remedy for this kind of error if we want to rectify from our end and not request the customer to rectify the TDS return.

Regards,
S Ram

Posts / Replies

[YAGAY andSUN]

This is a common and sensitive issue involving incorrect TDS credit due to a mismatch in PANs in the TDS return filed by the deductor (customer). Unfortunately, the scope for rectifying this mistake from your end (the deductee’s side) is extremely limited under the current Income Tax Act and TRACES portal processes.

🔴 Short Answer:

No, there is no mechanism available to transfer TDS credit from Company B’s Form 26AS to Company A, unless the deductor (your customer) revises their TDS return to correct the PAN details.

🧾 Legal and Procedural Background:

✅ TDS credit under Section 199 of the Income Tax Act

As per Section 199, TDS credit is allowed to the deductee only if:

1. The TDS is deducted on income belonging to the deductee,

2. It is reported correctly in the TDS return (Form 26Q/24Q/27Q),

3. The correct PAN of the deductee is mentioned.

So, even though Company A is the correct party, if the TDS was reported against the PAN of Company B, the credit belongs to Company B under the current system.

🔧 Available Remedy – Deductor Must Correct the TDS Return

The only effective remedy is:

🔁 The customer (deductor) must file a Revised TDS Return under the correct PAN of Company A and delete or revise the entry wrongly filed under Company B's PAN.

✅ Steps:

1. Deductor logs into the TRACES portal.

2. Uses RPU (Return Preparation Utility) to revise the relevant quarterly TDS return.

3. Corrects the PAN of the deductee (change from Company B to Company A).

4. Submits the corrected return.

5. Once processed, the TDS credit will reflect in Company A’s Form 26AS.

❌ Why It Can't Be Done from Your End:

• TDS returns are filed by the deductor, and only they can revise them.

• The TRACES system is PAN-linked — hence, there is no administrative or legal provision to transfer TDS credit from one PAN to another without correcting the TDS return.

📘 Judicial and CBDT Support

There is no direct judicial remedy that allows transfer of TDS credits across entities (PANs) without revision. The CBDT has also not issued any notification enabling such a process.

✅ Practical Advice

• Engage with your customer and formally request a revised TDS return.

• Offer to assist them with the revision process if needed.

• Maintain a record of correspondence in case a tax officer later questions the mismatch.

✍️ Suggested Language for Communication with Customer:

"Dear [Customer], we’ve observed that TDS for invoice [No./Date] was mistakenly filed under the PAN of Company B, while the transaction was conducted with Company A. This has led to a mismatch in Form 26AS, affecting TDS credit. We kindly request you to revise the TDS return to reflect the correct PAN of Company A to ensure accurate credit. We are happy to support your team in initiating this correction." 

Disclaimer - This discussion is not a Legal Opinion. Just a view to understand this issue to explore the potential solution.

*** 

[Ramanathan Seshan]

Dear Yagay and sun-sir,

Thank you for your detailed response. 

Would this of Rule 37BA come to the rescue ? 

 

(2) (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee :

Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1).

(ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person.

Regards,
S Ram

[YAGAY andSUN]

Excellent observation — you're referring to Rule 37BA of the Income-tax Rules, 1962, which deals with TDS credit where the income is assessable in the hands of a person other than the deductee.

Let’s address whether Rule 37BA(2) can rescue your situation:

✅ Understanding Rule 37BA(2)

Text of Rule 37BA(2):

"Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee:

Provided that the deductee files a declaration with the deductor, and the deductor reports the tax deduction in the name of the other person in the TDS return."**

🔍 Key Requirements under Rule 37BA(2):

1. The deductee must file a declaration with the deductor (customer).

2. The deductor must report the TDS in the name of the correct person (Company A) in the TDS return.

3. The rule contemplates prospective compliance, i.e., at the time of deduction and reporting — not post-facto corrections.

❌ Why Rule 37BA(2) Does Not Apply to Your Current Situation

While Rule 37BA(2) is often misunderstood as a remedy for post-facto PAN mismatches, in practice and by law, it cannot be invoked after the TDS return has already been filed and the credit has been reflected in the wrong PAN (Company B).

Here’s why:

• The declaration must be submitted by the deductee before the TDS return is filed, not after.

• The deductor must proactively report the correct PAN in the TDS return. There is no mechanism under Rule 37BA to shift credit across PANs in Form 26AS retrospectively.

• The TRACES system does not permit TDS credit shifting unless the deductor files a revised return.

📌 CBDT Circular No. 5/2011 dated 16 August 2011 further clarifies that Rule 37BA applies only when the deductor reports the TDS in the name of the actual assessee, with prior declaration. This cannot be implemented retrospectively through any authority other than a revised return.

🧾 Conclusion:

⚠️ Rule 37BA(2) does not offer a remedy in your current case, because the TDS return has already been filed with the wrong PAN, and the declaration and correct PAN reporting were not done at the time of deduction.

✅ The only effective remedy remains a revised TDS return by the deductor, correcting the PAN from Company B to Company A.

✅ Recommended Next Steps:

• Politely request the customer to revise the TDS return.

• Offer to assist or guide them through the RPU (Return Preparation Utility) and TRACES portal process.

• Document the error and your communication for future reference in assessments or scrutiny.

[Ramanathan Seshan]

Dear Yagay-sir,

Thanks for your meticulous reply. Can you please recheck the notification number ? looks like the notification is not pertaining to rule 37BA

Regards,
S Ram