Income Tax Notice Under Section 245: Meaning and Impact A notice issued under Section 245 of the Income Tax Act is an intimation from the Income Tax Department seeking the taxpayer’ consent to adjust any outstanding tax dues against the refund claimed for the current financial year. This intimation allows the taxpayer to either agree with the adjustment or raise an objection. Income Tax Notice Under Section 245: Meaning and Impact Income Tax Notice Under Section 245: Meaning and ImpactA notice issued underSection 245of the Income Tax Act is an intimation from the Income Tax Departmentseeking the taxpayer’ consent to adjust any outstanding tax dues against the refund claimed for the current financial year. This intimation allows the taxpayer to either agree with the adjustment or raise an objection.Let’ break down what this section involves and how it affects taxpayers.What Is Intimation Under Section 245?an intimation under Section 245is a formal communication from the tax department informing you that your pending tax liability from a previous financial year is being proposed to beset off against the current year’ refund.the income Tax Act, Section 245, empowers the department to carry out such adjustments.
However, they are legally required tonotify the taxpayerbefore proceeding, offering the taxpayer an opportunity to respond.Example to Illustrate Section 245Suppose the department raised atax demand of ₹21,000forFY 2012-13againstMr. Sharmaafter processing his return. Sharma disagreed with the demand, believing it was an oversight, as his TDS was not accounted for. To correct this, he filed arectification request under Section 154.Fast forward toFY 2016-17, Mr.
Sharma filed his return with arefund claim of ₹15,000. Instead of receiving the refund, he received an intimation under Section 245, informing him that the ₹15,000 refund was being adjusted against the pending ₹21,000 demand from FY 2012-13.Despite his earlier rectification request, the department had not accepted the correction, and the demand was still active. Hence, the refund was legally eligible for adjustment.Key TakeawayThe Income Tax Department is within its rights to offset any pending dues against your refund. However,they must issue an intimation under Section 245 before making such adjustments, allowing the taxpayer to either accept the adjustment or contest it.How to Respond to a Notice Under Section 245 of the Income Tax ActOnce you receive an intimation under Section 245, it’ crucial tocarefully review the contentsof the notice.
Make sure to check all the details, especially theresponse deadline(usually 30 days). If no action is taken within the given timeframe, the Income Tax Department will proceed toadjust the outstanding demand against your eligible refundby default.In simple terms,timely action is essential—your response determines whether the adjustment will go through automatically or be held for further review.Possible Scenarios and Steps to RespondThere are two outcomes when dealing with a notice under Section 245:Youagreewith the outstanding demand.Youdisagree(fully or partially) with the demand raised.If You Agree with the Outstanding DemandStep 1:Log in to the income Tax -Filing Portalusing your credentials (PAN, password, and captcha).Step 2:Navigate to:Pending Actions → Response to Outstanding Demand → Submit Response → Select ‘Demand is correct’ → Submit.Step 3:You’ll also have the option to pay the outstanding demand online at this stage.Step 4:Confirm that your response has been submitted successfully.Note: Even if you don’t respond, the refund will be adjusted against the demand after the due date.If You Disagree or Partially Disagree with the DemandStep 1:Log in to the income Tax Portalwith your user and password.Step 2:Go to:Pending Actions → Response to Outstanding Demand → Submit Response → Select ‘Disagree with demand (either in full or part)’ → Submit.Step 3:Specify your reasons for disagreement. Common reasons include:Tax demand already paidDemand reduced via rectification/revisionAppeal already filedRectification filed with AO or CPCAny other valid reasonStep 4:Submit your response and make sure your disagreement has been recorded. It’ advisable to save a copy for your records.
Follow up if necessary, as the final decision rests with the Income Tax Department.Why is Intimation Under Section 245 Issued?The Income Tax Department sends an intimation under Section 245when it plans toadjust any outstanding tax dues from a previous assessment year with the refunddue in the current year. This is typically done if there is apending demandagainst the taxpayer which hasn’t been cleared yet.Such intimations are usually triggered bymismatches in tax records,pending tax liabilities, ordemands that weren’t resolvedduring earlier assessments. It’ a mechanism to balance previous unpaid amounts with current-year refunds.Tip: It’ best to consult a tax professional before responding to such notices to avoid unnecessary complications.How to Check or Verify Outstanding Tax Demand?Here’ a simple step-by-step guide to view your outstanding demand details through the Income Tax Portal:Step 1:Go to the income Tax -Filing portaland log in using your PAN, password, and captcha code.Step 2:Once logged in, navigate to the”View Returns / Forms”section on your dashboard.Step 3:Click on”Income Tax Returns”to access the details of returns you’ve filed.Step 4:Select theassessment yearyou want to check.