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Did you Receive Intimation under section 245 of the Income Tax Act?

Updated on: May 6th, 2024

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8 min read

The mere mention of ‘Intimation from IT department’ may sound stressful, especially if you are getting it for the first time. Worry not, we will tell you all about this intimation u/s 245 of the Income Tax Act. And what is more, you will also understand how to deal with it from the comfort of your home!

Why did I receive intimation 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.

section 245 of the Income Tax Act

How to access details of outstanding tax demand?

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

Login e-filing portal
Response to Outstanding demand
  • The details of notice under Section 245 will be displayed.

Understanding the tax demand under Section 245

In case you are not sure how this demand has been calculated and whether you should pay for it or get it adjusted as per the intimation, do not worry! It is possible that there has been a genuine error or it may be that your demand has been incorrectly calculated. Our experts can review the return for the year for which demand has been raised and help you 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.

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:

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:

Login e-filing portal
  • Click the ‘Pending Actions’ tab and select the ‘Response to Outstanding Demand’ option.
Response to Outstanding demand
  • Click the ‘Submit Response’ button.
Submit response
  • 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.

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:

Login e-filing portal
  • Click the ‘Pending Actions’ tab and select the ‘Response to Outstanding Demand’ option.
Response to Outstanding demand
  • Click the ‘Submit Response’ button.
  • Select the ‘Disagree with demand (Either in full or part)’ option and click ‘Add Reasons’.
  • Select the option and click the ‘Apply’ button. You can select more than one option.
  • 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.    

Frequently Asked Questions

What are the consequences of failing to respond to an Intimation under Section 245?

Failure to respond to an Intimation under Section 245 of the Income Tax Act within the specified timeframe can have several consequences for the taxpayer. Here are some potential outcomes:

Automatic Adjustment: If a taxpayer does not respond within the stipulated period, the Income Tax Department may proceed with the automatic adjustment. In such cases, the outstanding demand mentioned in the intimation is likely to be automatically adjusted against any eligible refund for the current assessment year.

Increased Tax Liability: Non-response may lead to an increase in the taxpayer's overall tax liability as the outstanding demand from a previous year remains unresolved and may continue to accrue interest and penalties.

Legal Actions: Persistent non-compliance with tax obligations, including outstanding demands, may prompt the Income Tax Department to take legal action. This could involve initiating recovery proceedings, attachment of assets, or other legal measures to recover the outstanding dues.

Is there a penalty for non-payment of an outstanding demand?

While there may not be a specific penalty for having an outstanding demand, interest will accrue on the unpaid amount.

How can I check the status of my income tax refund?

Visit the Income Tax portal, navigate to 'My Account,' and click on 'Refund/Demand Status' to check the real-time status of your income tax refund.

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Understanding intimation under Section 245 of Income Tax Act, how to respond and consequences; Details of outstanding tax demand available on IT e-Filing portal.

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