Magnetotelluric (MT) method is one of the powerful tools to investigate the deep crustal image of mountainous regions such as Himalayas. Topographic variations due to irregular surface terrain distort the resistivity curves and hence may not give accurate interpretation of magnetotelluric data. The two-dimensional (2-D) topographic effects in Transverse Magnetic (TM) mode is only galvanic whereas inductive in Transverse Electric (TE) mode, thus TM mode responses is much more important than TE mode responses in 2-D. In three-dimensional (3-D), the topography effect is both galvanic and inductive in each element of impedance tensor and hence the interpretation is complicated. In the present work, we investigate the effects of three-dimensional (3-D) topography for a hill model. This paper presents the impedance tensor correction algorithm to reduce the topographic effects in MT data. The distortion caused by surface topography effectively decreases by using homogeneous background resistivity in impedance correction method. In this study, we analyze the response of ramp, distance from topographic edges, conductive and resistive dykes. The new correction method is applied to the real data from Sikkim Himalayas, which brought out the true nature of the basement in this region.