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A customer deducted TDS from payments but the tax never appears in the payee's Form 26AS, so the credit is missing at return time.
Prove the deduction with invoice, bank receipt and the customer's own records, then chase the deductor in writing on a fixed timeline until they deposit and report it.
One evidence folder per customer per quarter holding invoices, bank credits, TDS certificates or ledger confirmations and every chase email with dates.
A complete evidence pack and a dated chase log that support a credit correction or a recovery application.
If your customer really deducted TDS (tax deducted at source) from your payment, the law protects you from paying that tax a second time. Section 205 of the Income-tax Act 1961 bars the department from asking you for tax already deducted from your income. But the credit will stay missing from your TDS credit statement (Form 26AS, or Form 168 from tax year 2026-27) until the customer deposits it. So your job is to build proof and chase in writing.
Why does deducted TDS go undeposited?
Most cases are not fraud. They are slips in the customer’s accounts team. Here is what each usually looks like from your side.
| Likely cause | What you see in Form 26AS | What to ask the customer |
|---|---|---|
| Oversight: deducted in the books, challan never paid | Nothing for that quarter | ”Please share the challan number for this deduction” |
| Cash-flow delay: challan paid late | Entry appears a quarter or two later | ”When was the challan deposited?” |
| Challan paid under the wrong section or year | Nothing, or credit under a different head | ”Please check the section and year on the challan” |
| Return filed without linking the challan | Entry missing or marked unmatched | ”Please file a correction return linking the challan” |
| Wrong PAN quoted | Nothing in your statement | ”Please confirm the PAN in your return” |
Under the 1961 Act a deductor must deposit TDS by the 7th of the following month (30 April for March deductions). Late deposit costs them interest of 1.5% per month under Section 201(1A). Those are their problems, but they are good reasons the customer will want to fix it.
What proof do I need to protect my credit?
Put together four documents for every affected payment.
- The invoice showing the gross amount and the date.
- Your bank statement showing the net amount received. The difference between gross and net is the deduction.
- The customer’s written confirmation of the deduction: a TDS certificate (Form 16A under the 1961 Act), a ledger confirmation, or an email stating the amount and section.
- Your own ledger showing the TDS receivable you booked.
If the customer never issued a certificate, ask for a ledger statement from their books. A signed account confirmation is strong evidence.
What can I do if the customer ignores my requests?
Start polite and get firmer, always in writing.
- Send an email request with the evidence attached.
- Follow up after 15 days, copying their finance head.
- Send a formal written notice by email and registered post, listing amounts, dates and the quarters affected.
- If nothing changes, move to the recovery routes in the TDS credit recovery mechanisms article.
Worked example: ₹75,000 missing over four quarters
A design studio billed a client ₹2,50,000 a quarter in professional fees during 2025-26. The client should deduct 10% under Section 194J. But the studio found that only one quarter’s credit was showing.
| Quarter | Invoice | TDS at 10% | Bank received | In Form 26AS? |
|---|---|---|---|---|
| Q1 | ₹2,50,000 | ₹25,000 | ₹2,25,000 | Yes |
| Q2 | ₹2,50,000 | ₹25,000 | ₹2,25,000 | No |
| Q3 | ₹2,50,000 | ₹25,000 | ₹2,25,000 | No |
| Q4 | ₹2,50,000 | ₹25,000 | ₹2,25,000 | No |
The quarterly invoice is ₹2,50,000, so the yearly total is ₹10,00,000 and total TDS is ₹1,00,000. The missing credit is ₹25,000 × 3 = ₹75,000.
The studio’s chase timeline:
- Week 1: email with three invoices and three bank credit lines attached.
- Week 3: follow-up to the client’s finance head.
- Week 6: formal notice asking for challan numbers and a correction return.
- Week 10: client deposits the tax and files a correction; entries appear in Form 26AS a few weeks later.
Total interest the client paid for the late deposit was their cost, not the studio’s.
What to read next
- If the customer will not cooperate, read TDS credit recovery mechanisms in India.
- For ready-to-send wording, use the deductor query letter templates.
- To check deposit yourself first, see how to check whether your customer actually deposited the TDS.
When you have many customers deducting TDS, TransactIG reconciles your TDS receivable against your credit statement and puts every missing entry in an exception queue with an audit-ready export.