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Challan ITNS 281

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Challan ITNS 281 is the challan a deductor uses to deposit tax deducted or collected at source and to pay a demand raised against a TDS statement. It is paid through the e-Pay Tax service on the income tax e-filing portal rather than on TRACES.

What is challan ITNS 281 used for?

ITNS 281 is the deductor's challan, and it does two jobs. The first is the routine one, depositing tax deducted or collected at source for a period. The second is paying a demand, which is what happens after a statement is processed and a default is raised against it.

The distinction between the two shows up in the minor head. A demand payment goes under minor head 400, and the tutorial notes that paying with minor head 400 requires logging in to the income tax portal rather than using the route available without signing in.

Why is the payment not made on TRACES?

This trips people up regularly. The demand is raised on TRACES, the intimation is read on TRACES, and the justification report comes from TRACES. The payment does not happen there. It is made through the e-Pay Tax service on the income tax e-filing portal.

Once paid, the challan has to find its way back to the statement, which is a separate step on TRACES. Adding the challan to a filed statement is an online correction, and the tutorial on that function notes it cannot be done through offline correction at all.

The counterfoil is the proof

A successful payment generates a challan counterfoil carrying the challan identification number, the payment details and the name of the bank the payment was made through. The tutorial describes this counterfoil as the proof of payment having been made.

The challan identification number on it is what a later correction or reconciliation is keyed on, which is why the counterfoil belongs in the quarter's file rather than in a mailbox.

Which fields have to be right at payment?

Most challan corrections later trace to a field entered wrongly at payment.

  • The major head separates company deductees from non company deductees.
  • The minor head separates a routine deposit from a demand payment, with 400 reserved for the latter.
  • The assessment year and the section under which the deduction was made complete the identification.

These are worth checking before submitting, because correcting them afterwards is a separate process. Some fields can be corrected through OLTAS challan correction on TRACES without the assessing officer, and others cannot, so a careful minute at payment saves a request that has to be tracked.

What closes the loop after payment?

Payment on the income tax portal is not the end of the task. The challan exists, but until it is associated with the statement it was paid for, the return still shows the shortfall that prompted the payment.

That association is a correction on TRACES rather than anything on the payment side, and adding a challan to a filed statement is available only through online correction. A quarter is genuinely closed when the payment has been made, the challan has been added to the statement, and the corrected statement has been processed.

What has to happen before a quarter is closedPaying the challan is the first of three steps, not the last. Until the challan is added to the statement on TRACES and the corrected statement is processed, the return still shows the shortfall that prompted the payment.1The payment has been madeOn the income tax portal, under minor head 4002The challan has been added to the statementAvailable only through online correction on TRACES3The corrected statement has been processed
Paying the challan is the first of three steps, not the last. Until the challan is added to the statement on TRACES and the corrected statement is processed, the return still shows the shortfall that prompted the payment.

How to pay TDS or a TDS demand with challan ITNS 281

On incometax.gov.in, signed in as the employer

  1. Open the income tax e-filing portal

    Go to www.incometax.gov.in. For a demand payment under minor head 400, log in to the portal rather than using the route available without signing in.

    TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281, p. 3

  2. Open e-Pay Tax

    Click the e-Pay Tax option, available on the home page and under the Quick Links tab.

    TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281, p. 3

  3. Identify yourself and verify by OTP

    Enter the TAN or PAN and a mobile number for OTP verification, then enter the OTP received on that number.

    TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281, p. 3

  4. Select the assessment year and section

    Select the assessment year and click Proceed, then select the sections as required and continue.

    TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281, p. 3

  5. Select the nature of payment

    Select the nature of payment as required and click Continue.

    TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281, p. 3

  6. Enter the major head and the tax break up

    Select the major head, add the tax break up, and click Continue.

    TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281, p. 3

  7. Choose a payment mode

    Select the payment mode. Net banking, debit card, payment at a bank counter, RTGS or NEFT, and the payment gateway on the e-filing site are available. Click Continue to proceed.

    TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281, p. 2

  8. Keep the counterfoil

    On successful payment a challan counterfoil is generated carrying the challan identification number, the payment details and the bank through which payment was made. This counterfoil is the proof of payment.

    TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281, p. 3

What goes wrong

SymptomCauseFix
Minor head 400 is not available for the paymentPaying a demand under minor head 400 is only available to a logged in user on the income tax portal.Log in to www.incometax.gov.in and use e-Pay Tax from inside the account rather than the route available without signing in.TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281
The demand cannot be paid on TRACESTRACES raises the demand and holds the intimation, but the payment itself is made through e-Pay Tax on the income tax e-filing portal.Make the payment on www.incometax.gov.in, then return to TRACES to tag the challan against the statement.TRACES e-Tutorial, Online TDS/TCS/Demand Payment with Challan ITNS 281
The paid challan does not appear against the statementA challan paid outside the statement has to be added to it before the payment is reflected against the return.Use the add challan to statement correction on TRACES, which is available online only. The same function is disabled in offline correction.TRACES e-Tutorial, Online Correction, Add Challan to the Statement

Steps last read from the source documents on

Related terms

  • Challans — A challan is the instrument by which a statutory payroll deduction is paid to the authority that collects it
  • TDS Return — A TDS return is the quarterly statement a deductor files reporting the tax it deducted, the deductees it deducted from, and the challans by which the money was deposited
  • TRACES Online Correction — TRACES online correction is the functionality that lets a deductor correct a TDS statement already filed, working in the browser rather than through a downloaded consolidated file
  • TDS Default Intimation — A TDS default intimation is the communication CPC for TDS issues against a processed TDS statement where defaults have been found
  • TDS (Tax Deducted at Source) — TDS, or tax deducted at source, is income tax collected by the payer at the moment of payment rather than by the recipient later
  • CSI File — A CSI file is the challan status inquiry file a deductor downloads from the income tax e-filing portal, listing the tax payments made against its TAN
  • Justification Report — A justification report is the document TRACES produces listing the defaults and errors the Income Tax Department identified while processing a TDS statement for a quarter
  • Assessment Year — The assessment year is the twelve months following the financial year, in which the income of that financial year is assessed to tax

Frequently asked questions

What is challan ITNS 281 used for?

A deductor uses it to deposit tax deducted or collected at source and to pay a demand raised against a TDS statement.

Where do I pay challan ITNS 281?

Through the e-Pay Tax service on the income tax e-filing portal at www.incometax.gov.in, available on the home page and under Quick Links. It is not paid on TRACES.

Why do I have to log in to pay a demand?

The tutorial notes that to pay a challan with minor head 400 for a demand payment, the deductor has to log in to the income tax portal.

What proof do I have that the challan was paid?

The challan counterfoil generated on successful payment, which carries the challan identification number, the payment details and the bank the payment was made through.

Where Engage fits

The routine ITNS 281 deposit each month is only as reliable as the deduction figure behind it. Engage computes deduction in the payroll run and carries the same figure into the quarterly statement, so what is deposited and what is later reported come from one calculation.

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