TDS is applicable on almost every sales transaction (of a company) whether services or material (for goods sales greater than INR 50 Lakhs). TDS deducted by customers is deposited with the government and reflected in 26AS Form of a company on YTD (Year till Date) basis. TDS deposited with the government can be claimed after reconciliation of Form 26AS.

If a customer misses depositing TDS with the government, then that amount of TDS can’t be claimed but the company still has to pay Income tax as it would be showing that sales as part of their income. This creates a situation of working capital getting stuck for a year and can be claimed when its customer deposits TDS with the government in subsequent years.

To avoid this situation, what can be done by a company proactively, in Quarter 4, to avail maximum amount as tax credit and save working capital

1. Latest 26AS Form shall be downloaded from TRACES portal and TAN numbers of customers shall be updated
2. TDS Receivable ledger shall be updated on YTD basis
3. TDS Receivable ledger shall be reconciled with 26AS Form to identify deviations
4. Customers who have not deposited TDS shall be followed up to avoid working capital loss
5. Customers who have deposited higher amount of TDS in comparison to TDS Receivable ledger, transactions shall be analyzed and corrective actions like updating TDS Receivable ledger of follow up shall be done
6. If a customer has deposited TDS in wrong section or deposited TDS by mistake then an intimation shall be sent to customer

It is important to not leave reconciliation of 26AS Form as a year end activity as it may result in loss of significant amount of working capital.

If the above activities sound like too much of work to be done and if you think it will consume too much of time then you can consider automation of 26AS Reconciliation & follow ups so that you can spend more time on analyzing the data and claim maximum amount of TDS credit and explain the same to auditors.