How do you Respond to a Demand Notice from the Income Tax Department?

The Income Tax Department issues a demand notice under section 156 to taxpayers when they owe tax, interest, or penalty to the Income Tax Department. The intimation under section 143(1), issued by the Centralised Processing Centre (CPC), Bengaluru, is also considered a notice of demand when it demands the tax due from the taxpayer. Here, we are discussing the step-by-step guide on how taxpayers can respond to the demand notice from the Income Tax Department.

What is a Demand Notice?

Demand Notice under section 156 is the formal communication made by the Income Tax department to the taxpayer regarding the payment of taxes, interest or penalty due to the taxpayer. The payment has to be made within 30 days of the demand notice 

Types of (Deemed) Demand Notice under Section 156

The different types of demand notices or deemed demand notices under section 156 are as follows:

1. Intimation under Section 143(1)

The intimation under section 143(1) is also considered a demand intimation under section 156. The Central Processing Centre (CPC), Bengaluru, issue the intimation under section 143(1) to the taxpayer via email on their registered email address with the Income Tax Department as an acknowledgement that the department has processed the taxpayer’s Income Tax Return. The processing of ITR is done automatically, and the outcome of the ITR processing is intimated to the taxpayer. If the intimation asks for a tax, interest, or penalty to be paid, it is considered a demand notice under section 143(1).

2. Intimation under Section 200A(1)

Intimation under Section 200A(1) is the intimation issued by the Central Processing Centre (CPC), Bengaluru, regarding tax, interest, or penalty owed on the automatic processing of Tax Deducted at Source (TDS) by the Income Tax Department. It is also considered a demand notice under section 156.

3. Intimation under Section 206CB(1)

Intimation under Section 206CB(1) is the intimation issued by the Central Processing Centre (CPC), Bengaluru, regarding tax, interest, or penalty owed on the automatic processing of Tax Collected at Source (TCS) by the Income Tax Department. It is also considered a demand notice under section 156.

4. Payment of Advance Tax under section 210(3)

The demand notice issued by the Assessing Officer for the payment of advance tax under section 210(3) is also considered a demand notice under section 156. This notice under section 210(3) is issued when the Assessing Officer opines that the estimated income of the taxpayer justifies the higher payment of advance tax than paid by the taxpayer.

5. ESOP

The payment of tax owed on the income of the ESOPs of the eligible start-ups issued to the employees is due within 14 days of the earlier of any of the three events discussed below:

• Date on which the employee leaves the organisation, 
• 48 months have passed from the end of the relevant assessment year in which the employee owns these shares, or,
• The date on which shares are sold.

The Centralised Processing Centre (CPC), Bengaluru, issues the intimation for the tax owed on ESOPS' income. The intimation only sends the amount of tax liability. The payment of tax on ESOPs' income is deferred until the time as discussed above.

Time Limit To Respond To Demand Notice

The tax, interest or penalty demand intimation under section 143(1), section 200A(1), section 206CB(1) must be paid within 30 days of receiving the intimation. However, the timeline to pay tax is different for ESOP, as discussed above. The payment under section 210(3) must be made within 30 days of the issue of the demand notice under section 156. However, if a demand notice is issued in the middle of the financial year, the due date is according to the due date for the payment of the advance instalment.

Ways to Respond to a Demand Notice

On receiving the demand notice, the taxpayer must assess why the demand notice is being issued and calculate the liability. Based on his assessment and calculations, the taxpayer can respond to the Demand Notice in the following ways:

• Demand is correct
• Demand is partially correct
• Disagree with demand
• Demand is not correct, but agrees to the adjustment

How to Respond to a Demand Notice from the IT Department

Your jurisdictional Income Tax Officer (ITO) will upload the Demand Notice online. You can access the content of this notice by logging into your e-filing account on the website www.incometax.gov.in, where you can record your responses.

Note: As per the latest CBDT Notification, the date for sending intimation under section 143(1) relevant to ITR filed for AY 2023-24(FY 2022-23) has been extended to 25 November 2025, which was initially 31 December 2024.

Step-by-Step Guide to Respond to a Demand Notice

Step 1: Log in to your e-filing account on  www.incometax.gov.in  with your user ID and password.

Step 2: On your Dashboard, click ‘Pending Actions’ > ‘Response to Outstanding Demand’ to view a list of your outstanding demands.

 Note - If you want to make the payment, click ‘Pay Now’ on the same page, which will redirect you to the e-pay tax page. 

Step 3: On the ‘Response to Outstanding Amount’ page, click ‘Submit Response’ to submit a response.

What are the Options to Respond to the Demand Notice?

A. Submit a Response if the demand is correct and you have not paid it. 

Step 1: Select ‘Demand is correct' on the ‘Response to Outstanding Amount’ page. Once you select the response as Demand is correct, you cannot go back and disagree with the demand. 

Step 2: On the same page, select ‘Not Paid Yet’ and click ‘Pay now’. You will be led to the e-pay tax page to make the payment.

Note- A success message and the transaction ID will appear on successful payment. 

B. Submit a Response if the demand is correct and you have paid it already. 

Step 1: On the ‘Response to Outstanding Amount’ page, select the ‘Demand is correct’ 

Step 2: Select ‘Yes, already paid, and Challan has CIN’. Click on ‘Add Challan Details’. 

Step 3: To add the challan details, select Type of Payment (minor head), enter Challan Amount, BSR Code, Serial Number and select Date of Payment. Click ‘Attachment’ to upload the challan (PDF) copy and click ‘Save’. 

Note- The maximum size of a single attachment should be 5MB. If you have multiple documents to upload, zip them into a folder, and the size should be 50 MB.

Step 4: After entering all the Challan Details, click on ‘Submit’ the response. On successful payment, a success message with the transaction ID. 

C. Submit a Response if you Disagree with the demand (In full or in part).  

Step 1: Select the ‘Disagree with the Demand (in full or in part)’ option on the ‘Response to Outstanding Amount’ page. Click on ‘Add Reasons’

Step 2: Select the reason(s) for your disagreement from the options and click ‘Apply’.

Step 3: Click on the disagreement reason you have added in Step 2 and fill out the appropriate details. Completed status will be displayed against the reasons and click on ‘Submit’. 

Step 4: After submitting details for all the reasons listed in Step 2, click ‘Pay Now’ to pay the remaining amount available in the payment summary if you partially disagree. 

Note- You will be taken to the e-pay tax page to make the payment.

Step 5: After payment, you will be taken to the ‘Response to Outstanding Amount’ page. Click on ‘Submit’ to submit your responses. 

Step 6: Click ‘Confirm’ to submit your response. On successful submission, the transaction ID is displayed.

How do you View Submitted Responses (for those other than taxpayers)?

Step 1: Log in to the e-filing portal using a valid user ID and password.

Step 2: Click ‘Services’ > ‘Response to Outstanding Demand’ on your Dashboard.

Step 3: On the ‘Response to Outstanding Demand’ page, enter the PAN of the assessee (client) and search. You can search based on the Assessment year as well. 

Step 4: After the responses have been submitted by the assessee whose PAN has been entered in the previous step. Click on ‘View’ on the notice to view the response offered.

Step 5: The response to the outstanding amount will be displayed. Click on ‘OK’ to come back to the previous page.