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March 31 closes the financial year, but the Q4 TDS return is due May 31 and Form 16 by June 15. The balance sheet must state TDS payable and receivable correctly at March 31 using incomplete TRACES data, while Section 40(a)(ia) creates a 30 percent disallowance risk on any expense where TDS was required but not deducted or deposited.
Freeze the TDS payable ledger at March 31 and cross-reference challans against OLTAS to identify Q4 deductions awaiting the April 30 deposit. Reconcile TDS receivable against Form 26AS and AIS, provision for Q4 credits that will only appear after May 31 when deductors file, and classify open items into pending-return, pending-correction, or follow-up categories. Verify every above-threshold expense has TDS deducted to avoid Section 40(a)(ia) disallowance.
March 31 freeze rule on TDS ledgers. Provision register for pending-to-TRACES credits with supporting evidence attached. Section 40(a)(ia) exposure scan on expense ledger above TDS thresholds.
Accurate TDS payable and receivable balance at March 31, provisioned Q4 timing credits with supporting contracts and advice, zero Section 40(a)(ia) disallowance surprises, and a clean audit trail from March 31 close through May 31 Q4 filing.
The March 31 year-end is the most intensive TDS reconciliation period in the Indian financial calendar, not because the filing deadline falls then, but because of the gap between it. The Q4 TDS return is due 31 May; Form 16 by 15 June. Yet TDS payable and receivable must be stated correctly on the balance sheet at 31 March — based on transactions and evidence available before those filing dates. TDS year-end reconciliation in India requires finance teams to work from incomplete TRACES data and fill the gap with verifiable supporting records.
What the March Close Requires
At 31 March, two TDS ledgers must be reconciled: TDS payable (the deductor side) and TDS receivable (the deductee side). The payable ledger confirms that TDS collected from vendors and counterparties has been correctly deducted and is either already deposited or sitting as a current liability awaiting the 30 April deposit deadline. The receivable ledger confirms that TDS deducted from the organisation’s own income — fees, interest, rent received — is reflected in Form 26AS or, where it cannot be reflected yet because the deductor’s Q4 return is unfiled, is supported by alternative evidence.
Section 40(a)(ia) makes the payable side a hard deadline: any expense where TDS was not deducted or deposited is subject to a 30% disallowance in the year the expense was booked.
Where March Close Breaks Down
Last-Day Payments
Payments made on 31 March create TDS deductions that must be deposited by 30 April. At the close date, these sit in a TDS payable position. Finance teams that do not segregate 31 March deductions from earlier Q4 deductions may understate the payable balance or miscalculate the deposit deadline, leading to interest under Section 201(1A).
Retrospective Salary Revisions
Salary revisions backdated to 1 April and settled in March require TDS recomputation across the full year. Arrears trigger a higher TDS deduction in Q4 under the salary TDS rules, and the revised Form 16 or 24Q data must be reflected in the year-end balance.
Open 26AS Items from Q1–Q3
A March close that reconciles only Q4 often leaves earlier discrepancies — from Q1, Q2, or Q3 — still open. Where a deductor has not yet filed a correction return for a Q2 mismatch, that TDS receivable item should be provisioned rather than confirmed at year-end.
5-Step March Close Reconciliation
Step 1: Freeze the TDS Payable Ledger
Extract the full TDS payable balance as at 31 March, broken down by section and challan. Cross-reference each challan against the OLTAS deposit record. Identify any deductions made in Q4 where the challan has not yet been deposited — these are current liabilities as at 31 March.
Step 2: Agree TDS Receivable Against 26AS and AIS
Download Form 26AS and AIS from the Income Tax Department of India portal. Match each TDS receivable entry in the books against the corresponding 26AS credit. For credits present in AIS but not yet in 26AS, check whether the deductor’s Q4 return is still within its 31 May filing window — if so, create a reconciling item rather than booking a discrepancy.
Step 3: Identify Open Items and Classify Them
Separate open TDS receivable items into three categories: (a) credits pending because the deductor’s Q4 return is not yet due, (b) discrepancies from prior quarters where a correction return has been requested but not yet processed, and (c) genuine mismatches requiring follow-up or write-off. Each category has a different balance sheet treatment.
Step 4: Provision for Counterparty Timing Differences
Create a reconciling provision for TDS deducted by counterparties in Q4 (January–March) that will appear in 26AS only after 31 May when their return is filed. Support each provision entry with the contract, payment advice, or TDS certificate issued by the deductor. The provision is reversed when Form 26AS confirms the credit.
Step 5: Confirm TDS Payable Deposit for March
Verify that the last TDS challan for March deductions was deposited by 30 April. If any deposit was delayed, calculate Section 201(1A) interest at 1.5% per month and accrue it in the March accounts. File the Q4 return by 31 May with correct challan details for every March deduction.
March Close TDS Checklist
| Task | Data Source | Deadline | Owner |
|---|---|---|---|
| Freeze TDS payable ledger as at 31 March | ERP TDS payable module | 31 March | Finance Manager |
| Agree payable to OLTAS challan register | OLTAS (via TRACES) | 5 April | TDS compliance team |
| Download 26AS and AIS for TDS receivable | TRACES / IT portal | 5 April | Finance Manager |
| Identify Q4 open items (deductor return pending) | 26AS vs books comparison | 7 April | Finance Analyst |
| Provision for timing difference (Q4 credits pending) | Contract / TDS certificate | 10 April | Finance Manager |
| Deposit March TDS challan | Bank / NSDL | 30 April | TDS compliance team |
| File Q4 TDS return (24Q/26Q) | TRACES | 31 May | TDS compliance team |
| Issue Form 16 and Form 16A | TRACES (generated) | 15 June | TDS compliance team |
What Automated Reconciliation Changes
The 5-step March close process above involves matching data across at least four sources — ERP, OLTAS, Form 26AS, and AIS — for every TDS section and every deductor or counterparty. For an organisation with 10 active TDS sections and 80 deductors who deduct from its income, the manual effort runs to 4–7 staff days at year-end.
TDS year-end reconciliation software that holds the full-year TDS receivable ledger and maps it against Form 26AS quarter by quarter reduces the year-end task to reviewing exception items — those where no matching 26AS credit exists and where no Q4 provision has been created. The classification of open items (pending Q4 filing vs. genuine mismatch vs. correction return in progress) is maintained in the system rather than in ad-hoc spreadsheets.
Reconciliation software India platforms that integrate TRACES data can alert the team when a challan status remains unconfirmed ahead of the March close, giving teams time to follow up before accounts are finalised rather than after auditors flag the discrepancy.