TDS Reconciliation – Importance of KYC

By Avdhesh Sharma — In Process Automation, Tax Automation, Tax Law Changes — December 5, 2023



Know(ing) your customer (KYC) is always important and helpful whether in sales, marketing, human resource or in finance.

Let us take the case of TDS Reconciliation and understand how not knowing the customers or vendors can hurt a company.

26AS Reconciliation

In 26AS form, TAN number and legal name of company is available. However, companies have PAN / GST number available for their customers but they do not have TAN numbers available with them.

Many a times if a company is dealing with proprietorship firms or individuals then legal name also does not match with the trade name, which is usually maintained in company’s records.

To reconcile 26AS form with TDS receivable ledger, a company need to know that TAN number appearing in 26AS form belongs to which customer(s) so that TDS and income can be reconciled.

So, the solution for this problem is to ‘Know TAN details’ of your customer(s).

To read more about 26AS Reconciliation automation – click

Importance of KYC - TDS Reconciliation
Know your customer for TDS Reconciliation

TDS Payable Reconciliation or TDS Return filing

While deducting TDS for a vendor, it is important to know the details of the vendor based on PAN number. The details, which need to be verified before deducting TDS are

PAN Number – Whether PAN number provided is correct and belongs to a company or an individual. TDS Rate would also vary on type of company

206AB Compliance – Whether the vendor is 206AB compliant (have filed Income tax return in previous year) or not? If not, then double TDS rate need to be applied

PAN number linked with Aadhar – If a company is dealing with an individual then they also need to check if the PAN number is linked with Aadhar card or not. If PAN is not linked with Aadhar then the PAN becomes inoperative and TDS has to be deducted at highest rate which is 20%.

Whether it is 26AS reconciliation or TDS payable reconciliation ( or return filing, not knowing the customer or vendor with whom a company is doing business may attract explanation/ notice for Income Tax Department or penalty (if found being non-compliant).

Company has the option of checking these details manually or they can use tax technology solutions like TaxReco to automate these processes.

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