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

Updated on: Jun 16th, 2025

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5 min read

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:

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).

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.

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.

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.

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.

login to e-filing portal

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

Response to outstanding demand

 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. 

demand notice

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

Response to outstanding

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. 

demand is correct and not yet paid

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. 

transaction success

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’ 

demand is correct response to outstanding

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

yes already paid

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’. 

E-filing portal add challan details

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.

submit challan details

On successful payment, a success message with the transaction ID. 

transaction successful

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’

Disagree with the demand

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

response on demand
apply reasons

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’. 

reason to disagree on outstanding demand

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. 

Pay now

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. 

e-pay tax page

Step 6: Click ‘Confirm’ to submit your response.

submitting form

On successful submission, the transaction ID is displayed.

response to outstanding demand

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.

login e-filing portal

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. 

Enter PAN Number

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.

View submitted response

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

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Frequently Asked Questions

What is an IT notice?

An Income Tax notice is an official notification by the Income Tax Department issued to the taxpayer for compliance with the provisions of the Income Tax Act, 1961. The Income Tax  Department issues a notice to seek information related to discrepancies in the ITR filed, like mismatches in ITR and Form 26AS and AIS, arithmetic inaccuracies, high-value transactions, refund adjustments, etc or demand action from the taxpayer

What is the time limit for demand notice?

The Income Tax Act grants you 30 days from the date of notice to pay the outstanding amount. In exceptional cases, the assessing officer, with the prior approval of the Joint Commissioner, can reduce or extend the period or allow payment by instalment.

What is the penalty on demand notice?

The penalty under the demand notice is as follows: Under section 220(2), if you fail to pay the demand amount within 30 days of receiving the demand notice, you will be charged 1% simple interest per month or part thereof. Under section 270A, the penalty of 50% for underreporting income and 200% for misreporting income is imposed. A late filing fee for ITR is Rs. 1000 for income up to Rs. 5 lakh and Rs. 5000 for income exceeding Rs. 5 lakh. 
 

Will the refund be adjusted to outstanding demand?

If no action is taken until the date mentioned to respond on demand then the outstanding demand will be adjusted against the refund.

Can I not pay income tax notices?

No, you would have to pay criminal charges, fines and penalties and recovery proceedings if you do not respond to the income tax notice.

Can i file a revised return after receiving a demand notice?

Under 139(5) of the Income Tax Act, 1961 you can file a revised return if you face any discrepancy in the return that you have filed on or before 31 December or before the completion of assessment whichever is earlier. However, if the demand notice is under intimation 143(1), you can file a revised return. If the demand notice is scrutiny assessment order under section 143(3), you can not file revised ITR.
 

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