Intimation Under Section 245 of The Income Tax Act

If you received an intimation under Section 245 of the Income Tax Act.This notice is issues by the Income Tax Department when the departments wants to adjust your refund for one financial year against an outstanding tax demand from another. It's not a cause for panic, but it does require timely action. This article, we explain why this intimation is issues, how do you check your outstanding demands details, and the steps to respond within 30 days. 

Why is the Intimation Issued Under Section 245?

This intimation can be issued when you have a refund for a given FY and also a tax demand pending to be paid for a different FY. Section 245 of the Income Tax Act empowers the assessing officer (AO) to adjust the refund (or a part of the refund) against any tax demand that is outstanding from the taxpayer. In simple words, the IT department wants to adjust the refund due against a demand due from you. This demand may pertain to an earlier assessment year.

How to Access Details of Outstanding Tax Demand?

The details of your outstanding demand can be viewed on the Income Tax e-Filing portal.

1. Login with username and password.
2. Click the ‘Pending Actions’ tab and select the ‘Response to Outstanding Demand’ option.
3. The details of notice under Section 245 will be displayed.

Responding to Intimation Under Section 245

When you receive an intimation under Section 245, review its details and the time provided to respond. If you miss the deadline to respond, the outstanding demand will be considered for adjustment against your refund. You can respond to the intimation in two ways: Demand is correct and  Disagree with demand (either in full or in part).

Following is the process to respond to the intimation:

If Demand is correct:

When you agree with the outstanding demand, you must log in the Income Tax e-Filing portal and enter the response that the demand is correct. Following is the process:

1. Login to the Income Tax e-Filing portal with user name and password.
2. Click the ‘Pending Actions’ tab and select the ‘Response to Outstanding Demand’ option.
3. Click the ‘Submit Response’ button.
4. Select the ‘Demand is Correct’ option and click the ‘Submit’ button.

If the refund is due, the outstanding amount and the interest will be adjusted against the refund due. Otherwise, you must pay the demand amount immediately.

If you Disagree with Demand (Either in Full or in Part):

When you do not agree with the outstanding tax demand, you must log in the Income Tax e-Filing portal and enter the response that you disagree with the demand (either in full or part). In such a case, you will have to provide reasons for your response. Following is the process:

1. Login to the Income Tax e-Filing portal with user name and password.
2. Click the ‘Pending Actions’ tab and select the ‘Response to Outstanding Demand’ option.
3. Click the ‘Submit Response’ button.
4. Select the ‘Disagree with demand (Either in full or part)’ option and click ‘Add Reasons’.
5. Select the option and click the ‘Apply’ button. You can select more than one option.
6. Enter the appropriate details for each reason that you selected and click the ‘Submit’ button.

After submission of your reason, it is up to the income tax department whether it agrees to your reason or not.

Reach out to us support@cleartax.in in case you have received an intimation under section 245 and need help to respond to it.    

Consequences of not Responding to Intimation Under Section 245

You must submit a response to the intimation under Section 245 within 30 days of receiving it. When you do not respond to the intimation within 30 days, outstanding demand will be considered for adjustment against your refund after considering interest on demand. The interest is chargeable on principal demand pending the relevant assessment year. Thus, the interest demand will be adjusted against the refund without confirmation of the assessee.