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A deductor has a TDS demand and does not know why, so cannot tell what to pay and what to correct.
The justification report breaks the demand into defaults by type (short deduction, short payment, interest on late deduction or deposit, late filing fee) and points each to the challan or deductee row that caused it.
TRACES deductor login, TAN, tax year, quarter and form, the password instructions, and the quarter's challan and deduction registers to compare.
Each demand line traced to its cause and marked pay or correct, with the conso file requested where a correction is needed.
A TDS justification report is the TRACES download that lists, for each default on your processed TDS return, why the department found a short deduction, short payment, interest or late fee. It points to the challan or deductee row behind each amount. Read it before paying any demand, so you fix the cause instead of paying blindly.
TRACES is the TDS portal of the Centralised Processing Cell. A default is a gap found when your return was processed under Section 200A.
How do I request and open the report?
- Log in to TRACES as the deductor.
- Request the justification report for the TAN, tax year, quarter and form (for example 26Q, or Form 140 from tax year 2026-27).
- Wait for it to be generated. It typically appears in your downloads within a few hours to a day.
- Download it. It usually arrives as a password-protected compressed file; the password format is shown on TRACES.
- Open it in a spreadsheet, or with the TRACES conversion utility if prompted.
What does each section show?
| Report section | What it shows | Likely fix |
|---|---|---|
| Short payment | Challans where linked deductions exceed the balance | Re-link to an unused challan, or pay the gap |
| Short deduction | Rows where the rate used was below the required rate | Pay the shortfall, or correct a wrong PAN or section |
| Interest on late deduction | Rows deducted after the due date, 1 percent per month | Pay, or correct a wrong date |
| Interest on late payment | Challans deposited after the due date, 1.5 percent per month | Pay, or correct a wrong challan date |
| Late filing fee | Days late multiplied by ₹200 under Section 234E | Pay; capped at the TDS amount |
Interest under Section 201(1A) counts part of a month as a full month, under Rule 119A. A deposit due by 7 August and made on 9 August still carries a full month of interest.
A worked example: a ₹7,400 demand traced line by line
Your Q1 demand is ₹7,400. The justification report shows:
| Line | Type | Cause | Amount |
|---|---|---|---|
| 1 | Short payment | 4 rows linked to challan 2 total ₹50,000; challan holds ₹45,000 | ₹5,000 |
| 2 | Interest on late payment | ₹46,667 of TDS deposited 2 months late at 1.5 percent | ₹1,400 |
| 3 | Late filing fee | Return filed 5 August, 5 days after 31 July | ₹1,000 |
| Total | ₹7,400 |
Check: ₹5,000 plus ₹1,400 plus ₹1,000 equals ₹7,400. ₹200 times 5 days equals ₹1,000. ₹46,667 times 1.5 percent times 2 is about ₹1,400.
Now decide line by line. Line 1 may be a linking error: if an unused challan exists, re-link it by correction and the ₹5,000 disappears. Lines 2 and 3 are genuine; pay them.
When is the report not enough?
The report tells you what is wrong. It does not let you fix it. For a correction statement, you also need the conso file. For a vendor saying the credit is missing, they should check their TDS credit statement (Form 26AS, or Form 168 from tax year 2026-27) after your correction is processed.
If the report points to a challan you cannot find, check whether it was paid under the wrong head or TAN.
What to read next
- TDS demand notice reconciliation: turning the report into a response plan.
- What is a TDS conso file and when do you need it?
- TRACES portal reconciliation
- TDS reconciliation software: TransactIG reconciles TDS across books, challans and credit statements, with an exception queue and audit-ready exports.