A client presented with unresolved TDS demands spanning FY 2007-08 to FY 2021-22. A structured challan reconciliation revealed that fresh tax deposits may not have been necessary at all — if the right facility had been used in time. This article documents the process, the facility available on TRACES, and a critical system restriction that most practitioners are unaware of.

On taking over this client’s TDS compliance, the TRACES portal showed outstanding demands stretching across multiple financial years. Prior consultants had treated each demand as a settled liability — no challan reconciliation had ever been carried out. The working assumption: the demand is genuine, deposit the tax, and close the matter.

A detailed review told a different story.

1.  Downloaded Justification Reports from TRACES  —  for each affected financial year, to understand the nature and quantum of defaults

2.  Verified all OLTAS challans deposited  —  cross-referenced against amounts reflected in filed TDS statements

3.  Analysed challan-wise utilisation  —  identified surplus balances — challans deposited but never mapped against defaults

4.  Reviewed deductee PAN errors and short deduction  —  to establish whether the demand arose from data errors or genuine non-deposit

5.  Contacted CPC-TDS directly  —  to confirm the challan tagging facility and understand its constraints

CPC confirmed that TRACES provides a facility to tag unutilised challans directly against outstanding demands. Where a sufficient surplus exists, this can reduce or fully eliminate the demand without any fresh deposit.

However, there is a critical restriction that most practitioners are unaware of.

Before advising a client to deposit fresh tax against any TDS demand, complete the following steps:

–     Confirm year-wise demand breakup from TRACES

–     Download and review the Justification Report in full

–     Verify all OLTAS challans for the relevant years

–     Identify unutilised challan balances year by year

–     Confirm challan falls within permissible utilisation window (same year or next year only)

–     Review correction statements and deductee PAN data

–     Contact CPC-TDS if tagging fails or portal behaviour is unclear

Never treat a demand as a payment instruction

Reconcile before you deposit. The liability may be reducible or avoidable entirely.

Preserve old challan records

OLTAS data from a decade ago can still carry practical value — until the adjustment window closes permanently.

Understand the year-wise window before planning corrections

A large surplus from FY 2009-10 cannot settle a demand from FY 2014-15. Plan correction filings with this restriction firmly in mind.

Periodic reconciliation is not optional

Annual TDS reconciliation is the only reliable way to catch gaps before the adjustment window expires.