TDS Deducted But Not Showing in 26AS: The NRI Recovery Path

Every TDS deduction on an NRI payment under Section 195 — interest, dividends, capital gains on property sale, professional fees — flows to 26AS through Form 27Q, not Form 26Q (which is the resident-payee form). The deductor files Form 27Q quarterly on TRACES, the system maps the challan-to-PAN linkage, and 26AS populates within 7-15 days of filing.

The deductor's failure to file Form 27Q for the quarter is the single largest cause of missing 26AS entries on NRI returns. Buyers of property frequently file Form 26QB (the resident-seller form) by mistake, which deposits the challan but never links to the NRI's PAN. Banks switching CBS systems sometimes miss a quarter. AMCs occasionally classify NRI redemptions under Form 26Q for resident investors.

The quarterly cycle: 31 July for Q1 (April-June), 31 October for Q2 (July-September), 31 January for Q3 (October-December), 31 May for Q4 (January-March). Until the deductor files for the relevant quarter, 26AS shows nothing.

Upload your 26AS now and identify which quarters are missing TDS entries that should be there.

The buyer of an NRI's Indian property must withhold under Section 195 at 12.5% on long-term capital gains (post-Budget 2024) or 30% on short-term gains, and deposit via challan within 7 days of the next month. The buyer then files Form 27Q for the quarter to link the challan to the seller's PAN. The Form 27Q filing is the step that lands the entry in the seller's 26AS.

Residential buyers frequently file Form 26QB instead — the form designed for resident-seller transactions under Section 194-IA. Form 26QB deposits the TDS challan but classifies the seller as resident. The seller's 26AS shows nothing because the form did not target an NRI-PAN linkage.

The buyer's correction route is to file Form 27Q for the relevant quarter, request TRACES to delete the erroneous Form 26QB, and reconcile the challan against the new Form 27Q. CBDT's TRACES challan correction directive permits this for up to two years from end of FY.

For the seller, parallel actions: collect Form 16A from the buyer (the buyer's TDS certificate generated post-Form-27Q), retain the buyer's challan deposit acknowledgement (the BSR code, challan serial, and deposit date are the unique identifiers TRACES uses for any rectification), and apply for Section 197 Form 13 before the next property transaction.

Form 16A is the TDS certificate the deductor issues to the deductee — bank to FD holder, buyer to property seller, AMC to redeemer. It contains the BSR code of the challan, the deposit date, the challan serial number, and the gross / TDS amounts. Section 203 of the Income-tax Act obliges the deductor to issue Form 16A within 15 days of the Form 27Q quarterly filing.

Where Form 16A exists but 26AS does not show the entry, the deductor has likely deposited the challan but not filed Form 27Q. Form 16A is then proof of deduction but not proof of credit. ITR-2 cannot rely on Form 16A alone — CPC matches the TDS claim against 26AS at processing and any unmatched portion triggers a Section 143(1)(a) intimation reducing the claim.

The seller's recovery path: chase the deductor to file Form 27Q for the quarter, and where the deductor refuses, file Section 154 rectification with the Jurisdictional Assessing Officer attaching Form 16A plus the challan deposit acknowledgement. The AO has the power to manually update 26AS via TRACES.

Where Form 16A also does not exist — the deductor never issued it — Section 200A allows the deductor's jurisdictional AO to issue a notice compelling the filing of Form 27Q and the issuance of Form 16A.

The CBDT's TRACES challan correction framework permits the deductor to revise Form 27Q for up to two years from the end of the financial year of deduction. The revision corrects PAN linkage, quarter classification, deductee details, or amount. The revised return reflects in 26AS within 15 days.

Where the deductor refuses to revise, the deductee files Form 26A reconciliation request on TRACES citing the deductor's challan as deposited but unlinked. CPC routes the request to the deductor's TAN-jurisdiction AO who is empowered under Section 200A to compel the correction.

Beyond the two-year window, correction requires a CBDT special order under the residual powers of Section 119. The petition is filed with the PCIT or CCIT supported by documentary proof. CBDT typically grants where the deductor's failure is documented and the deductee can show no contributory fault.

For NRIs whose 26AS is missing entries from FY 2020-21 onwards, the 5-year Section 119(2)(b) condonation window also overlaps — the recovery can proceed via ITR-2 condonation petition rather than 26AS correction.

Section 154 grants the AO the power to rectify any apparent error in an order or intimation. Where ITR-2 has been processed under Section 143(1) and the TDS claim was reduced because 26AS did not reflect the deduction, Section 154 is the rectification route.

The petition is filed online at incometax.gov.in under the e-Proceedings tab. The grounds: (a) the TDS was actually deducted, evidenced by Form 16A and the deductor's challan acknowledgement; (b) the omission from 26AS is the deductor's reporting failure, not a fact dispute; (c) the rectification is sought under Section 154 to credit the full TDS.

The AO has the power to manually update 26AS via TRACES on the basis of the documentary proof, then re-process the Section 143(1) intimation with the corrected TDS credit. The refund issues to the NRO account (or foreign account if Schedule TR specifies) typically within 90-120 days of the rectification order.

Section 244A interest at 6% accrues from 1 April of the AY to the refund date — the delay caused by the deductor's reporting failure does not reduce the interest entitlement.

Where the property buyer has emigrated, the bank has merged, or the AMC has wound up the relevant fund, the deductor-side correction is impractical. The recovery routes are then: Section 154 rectification with documentary proof, and Section 119(2)(b) condonation where the FY has closed and ITR-2 was not filed.

For the rectification route, the documentary stack: Form 16A (if issued), challan deposit acknowledgement showing BSR code and serial, the property sale deed or bank statement showing the gross-of-TDS payment, and a chronology of attempts to contact the deductor. The AO can issue the rectification on substantive proof even where the deductor's TAN record is dormant.

For the Section 119(2)(b) route, the petition runs through the PCIT supported by the same documentary stack plus an explanation of why ITR-2 was not filed in the original year. The 5-Assessment-Year window is the outer limit.

Throughout the delay, Section 244A interest accrues at 6% simple. On a ₹15 lakh TDS deduction recovered 3 years late, the interest component alone is ₹2,70,000 — material enough to offset the delay cost on its own.