Section 399 Income Tax Act 2025: How Are TDS and TCS Statements Processed?
Section 399 prescribes how the Income Tax Department processes tax deducted at source (TDS) and tax collected at source (TCS) statements, including correction statements. It covers apparent errors, interest, fees, payable balances, refunds, intimations and centralised processing.
Chapter: XIX - Collection and recovery of tax.
Applicable law: Income-tax Act, 2025, as amended by the Finance Act, 2026.
Official source: Income Tax Department - amended Act (PDF).
What is the purpose of Section 399?
Section 399 establishes a statutory processing mechanism for all TDS and TCS statements, including correction statements. The mechanism permits limited adjustments apparent from the statement, calculation of applicable interest and fees, determination of sums payable or refundable, issue of an intimation, and grant of a refund where due.
Processing a statement under Section 399 should not be confused with an assessment of the payee's total income. The provision addresses the deductor's or collector's statement and the resulting balance or refund.
Section 399(1): How are TDS and TCS statements processed?
| Provision | What the law requires | Practical effect |
|---|---|---|
| 399(1)(a) | Compute tax deductible or collectible after correcting arithmetical errors and incorrect claims apparent from the statement. | Obvious numerical and statement-based inconsistencies may be adjusted. |
| 399(1)(b) | Compute interest, if any, on the basis of amounts deductible or collectible reflected in the statement. | Applicable interest is included in the processing result. |
| 399(1)(c) | Compute the fee, if any, under Section 427(1) and (2). | Statutory filing-related fees may be taken into account. |
| 399(1)(d) | Determine the amount payable by, or refundable to, the deductor or collector after adjusting the computed amounts against relevant payments. | Deposits and payments of tax, interest and fees are reconciled. |
| 399(1)(e) | Prepare or generate an intimation specifying the amount payable or refund due. | The deductor or collector is informed of the processing outcome. |
| 399(1)(f) | Grant a refund due to the deductor or collector as determined under clause (d). | Excess amounts determined refundable are to be refunded. |
Adjustments for incorrect claims
Section 402(3) defines an incorrect claim apparent from any information in the statement to include a claim based on an entry inconsistent with another entry of the same or another item in that statement, or an entry concerning a TDS or TCS rate that does not conform to the Act. This confines the stated category of adjustment to information apparent from the statement; it is not an unlimited power to determine disputed facts through summary processing.
Interest and fees
Section 399(1)(b) provides for computing interest, if applicable, based on the statement. The relevant consequences of failure to deduct, collect or pay tax are addressed in Section 398. Section 399(1)(c) refers to Section 427(1) and (2) for fees; this is the Finance Act, 2026 amended cross-reference, replacing the earlier reference to Section 427 generally.
Adjustment and intimation
Under Section 399(1)(d), amounts paid under Sections 397(3), 398 and 427(1) and (2), and amounts otherwise paid as tax, interest or fee, are considered in determining the net payable or refundable amount. An intimation specifying that result is then issued under Section 399(1)(e). A refund found due is to be granted under Section 399(1)(f).
Section 399(2): What is the time limit for issuing an intimation?
An intimation under Section 399 must be sent within one year from the end of the tax year in which the statement is filed. The statutory trigger is the tax year of filing the statement, not necessarily the tax year to which the underlying deductions or collections relate.
Illustration: If a statement is filed during tax year 2026-27, the statutory one-year period is counted from the end of that tax year. The actual last permissible date must be determined using the statutory meaning and boundaries of the tax year and any applicable law.
Section 399(3): Centralised processing scheme
The Central Board of Direct Taxes (the Board) may make a scheme for centralised processing of statements for the purposes of Section 399(1). The provision authorises such a scheme; it does not itself set out all operational procedures of any scheme.
Relevant statutory definitions and expressions
- Incorrect claim apparent from any information in the statement - Section 402(3)
- A claim based on a statement entry inconsistent with another entry, or an entry applying a TDS/TCS rate not in accordance with the Act.
- Deductor
- The person responsible under the relevant statutory provisions for deducting income-tax at source and reporting it.
- Collector
- The person responsible under the applicable provisions for collecting income-tax at source and reporting it.
- Correction statement
- A statement furnished to correct information in an earlier TDS/TCS statement, within the applicable statutory and procedural framework.
- Intimation
- The communication generated under Section 399(1)(e) identifying an amount payable by, or a refund due to, the deductor or collector.
- Board
- The Central Board of Direct Taxes, empowered under Section 399(3) to make a centralised processing scheme.
Explanatory descriptions are for understanding; expressions expressly defined in the Act retain their statutory meanings.
Practical examples of Section 399 processing
Example 1: Arithmetic mismatch in a TDS statement
A deductor reports individual deductions totalling Rs. 48,000 but enters Rs. 45,000 as the aggregate. An arithmetical error apparent from the statement may be adjusted during processing under Section 399(1)(a)(i), subject to reconciliation of amounts actually paid.
Example 2: Incorrect TDS rate reported
A TDS statement uses a rate inconsistent with the applicable provision of the Act. Where the incorrect claim is apparent from statement information within Section 402(3), it may be adjusted under Section 399(1)(a)(ii). The correct rate depends on the particular transaction and statutory conditions.
Example 3: Refund after reconciliation
A collector's statement and the relevant payments show that the amount deposited exceeds the amount payable after permitted adjustments. Section 399(1)(d) to (f) provides for determining and granting the resulting refund to the collector.
Frequently asked questions
What is processed under Section 399?
Every TDS or TCS statement, including a correction statement, is subject to the processing mechanism in Section 399(1).
What mistakes may be adjusted during processing?
Arithmetical errors and incorrect claims apparent from the information in the statement may be adjusted under Section 399(1)(a).
Can processing result in a refund?
Yes. Section 399(1)(d) to (f) provides for determining and granting a refund due to the deductor or collector.
What is the deadline for sending an intimation?
Under Section 399(2), the intimation must be sent within one year from the end of the tax year in which the statement was filed.
Does Section 399 allow centralised processing?
Yes. Section 399(3) authorises the Board to make a scheme for centralised processing of statements.
Legal note: This article is an explanation of Section 399. Applicable rules, schemes, amendments and the facts of a particular statement should be verified before filing or responding to an intimation.