Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →
A deductor receives a TDS default notice showing short payment even though the full TDS was deposited.
Short payment is computed per challan: the deductions linked to a challan in the return are compared with the challan's available balance. A linking or challan-detail error creates a short payment even when total money deposited is enough.
Challan register with BSR code, date, serial number and amount; record of which return each challan was used in; justification report for the quarter.
Each short payment classified as a linking error (fix by correction statement) or a real shortfall (fix by paying with interest).
Short deduction means too little tax was deducted from a payment. Short payment means the challan amount linked to your reported deductions is below the tax you reported. That can happen even after you paid in full, if the challan was not linked correctly in the return or its details were entered wrongly.
A challan is the payment slip used to deposit TDS. In the return, every deductee row is linked to one challan. The department checks each challan separately, not your total deposits.
Why does short payment appear when I paid in full?
| Likely cause | What happened | Fix |
|---|---|---|
| Challan not linked | Rows linked to the wrong challan, or none | Correction statement re-linking rows |
| Challan split across returns | Same challan used in two quarters, overused | Re-link to an unused challan |
| Interest or fee not paid | Tax paid, but interest or late fee missing | Pay the balance against the demand |
| Wrong challan details | BSR code, date or serial number mistyped | Correct the challan details in the return |
| Deposited under wrong head or section | Money sits elsewhere | Challan correction first |
How do I tell short deduction from short payment on the notice?
The intimation under Section 200A and the justification report show defaults by type. Look for the label next to each amount.
- Short deduction: the report shows a deductee row where the rate used was lower than required. A common case is a missing PAN, where Section 206AA requires 20 percent.
- Short payment: the report shows a challan where linked deductions exceed the challan’s balance.
If it says short payment, start with your challan register, not your vendor bills.
What does each one cost?
| Default | Charge |
|---|---|
| Short deduction | Deduct and pay the shortfall, plus 1 percent per month under Section 201(1A) |
| Short payment | Pay the shortfall, plus 1.5 percent per month under Section 201(1A) |
| Late filing (separate) | ₹200 per day under Section 234E, capped at the TDS amount |
A linking error costs no extra tax. Fix the link through a correction and the demand should drop once the correction is processed.
A worked example: ₹5,000 short on a ₹50,000 challan link
In the August rows of your return you reported ₹50,000 of TDS. You linked them to one challan of ₹45,000. You had also deposited ₹5,000 more that month, but under the wrong head (the income tax challan rather than the TDS one).
| Item | Amount |
|---|---|
| TDS reported in August rows | ₹50,000 |
| Linked challan balance | ₹45,000 |
| Short payment on notice | ₹5,000 |
| Money deposited under wrong head | ₹5,000 |
Check: ₹50,000 minus ₹45,000 equals ₹5,000. You did pay in full, but the second ₹5,000 is not a TDS challan, so it cannot be linked.
Your options:
- Get the ₹5,000 challan corrected to the TDS head, then link it by a correction statement.
- Or pay ₹5,000 now with interest at 1.5 percent per month (₹75 a month), and seek a refund or adjustment of the wrong-head deposit separately.
What to read next
- How do I pay a TDS demand online, step by step?
- TDS demand notice reconciliation
- TDS challan mismatch resolution
- TDS reconciliation software: TransactIG reconciles TDS deductions against challans and puts overused or unlinked challans in an exception queue before you file.