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Section 245 of Income Tax Act

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Maharshi Shah

Income Tax
Refund & Notices
Section 245
Last updated on July 12th, 2021

The Income Tax Department sends notices to the taxpayer for a variety of reasons. The Intimation under Section 245 of the Income Tax Act is sent in case of outstanding demand. In simple words, if a taxpayer has an outstanding tax liability of a previous financial year, the Assessing Officer (AO) can adjust such a refund against the outstanding tax liability.

What is Notice under Section 245 of Income Tax Act?

Intimation under section 245 is issued by the IT Department to intimate the taxpayer that their previous year’s pending tax dues are being offset with the current year’s refund. The details of such intimation reflect in the income tax login account of the taxpayer. The taxpayer has an option to pay the outstanding demand if they agree with the notice or submit a response if they disagree with the notice. If the taxpayer does not respond, the AO can adjust the refund against the outstanding tax demand.

Viewing Details of the Outstanding Tax Demand

Taxpayers can view the details of their outstanding tax demands on the Income Tax eFiling portal. Taxpayers simply need to login and navigate to e-File > Response to Outstanding Tax Demand. Hence, details related to the same would be available under this view. The taxpayer also has to submit a response to the IT Department. This action can also be carried out from under this view.

Notice under section 245

Responding to Notice u/s 245

It is important to go through the details of the notice after receiving it from the department. Along with the details, it is also important to realize how long does one have to respond back to this notice. Moreover, if you miss the deadline to respond to such a notice then the outstanding demand as on that date will be considered for adjustment against your refund. Following are the three possibilities:

Consequences of not Filing a response to the Notice u/s 245

The taxpayer has to submit a response to the notice u/s 245 within 30 days of receiving this notice. Failing to do so will result in outstanding demand considered for adjustment against your refund after considering interest on demand. The interest is chargeable on principal demand pending of relevant AY. Therefore, the demand of interest will be adjusted against the refund without any confirmation of the assessee.

Procedure to Provide a Response to the Notice Under Section 245 of Income Tax Act

Follow the steps given to submit a response to the IT Department

  1. Visit the e-Filing portal

    Visit the e-Filing portal and login using valid credentials.

  2. e-Proceedings

    Click on “Pending Actions > e-Proceedings

  3. View Notice u/s 245

    Click on the option to view the notice under the “Self” tab.View Notice under section 245 of Income Tax Act

  4. Notice or Letter pdf

    Click on the notice/letter pdf option.Notice or Letter pdf for section 245

  5. Submit Response

    Click on the option to submit response.Submit Response for Notice Under Section 245

  6. Options to Respond to the Notice

    Details of Outstanding Demand related to 245 demand will be displayed. You can either select Demand is correct or Disagree with Demand (Either full or Part) or Demand is not correct but agree for adjustment.Option to Respond to the Notice

  7. Demand is Correct

    If you select Demand is correct, you will be required to select the checkbox and provide an answer to Have you already paid the demand amount and add the challan details, if already paid and click Save.Demand is Correct

  8. Disagree with Demand

    If you select Disagree with Demand (Either full or Part), you will have to add reason(s) for disagreement and click Save.Disagree with Demand under section 245 of Income Tax Act

  9. Demand is not Correct but Agree for Adjustment

    If you select Demand is not correct but agree for adjustment, click Continue and add a reason for disagreement.Response to Notice under section 245 of income tax act

  10. Submit Response as Priority

    Enter Set Priority for the order in which the adjustment is favoured and click Submit Response.Respond to Notice under section 245 of Income Tax Act

  11. Declaration

    Select the Declaration checkbox and click Proceed to e-Verify. Declaration for Submission of Response to section 245 of income tax act

On successful e-Verification, a success message is displayed along with a Transaction ID and Acknowledgment Number.

FAQs

Is IT section 245N(a) (iii) of advance ruling applicable for residents also?

No, section 245N(a) is applicable to non-resident. It is only applicable to a certain category of residents (including public sector units)

What happens if we do not respond to the notice within 30 days?

Applicability of a penalty is possible if there is no submission of response within the 30 day limit.

Got Questions? Ask Away!

  1. Hi @emmy

    You can follow the steps given to submit a response to the IT Department

    • Firstly, login to the income tax efiling portal using your ID and password
    • Click on e-File > Response to Outstanding Demand
    • Click on the Option to “Submit” if you wish to respond to this notice.
    • Clicking on submit would take you to a different screen where you will be asked to choose from one of the 4 options as shown below.
    1. Demand is correct
    2. Demand is partially correct
    3. Disagree with Demand
    4. Demand is not correct but agree for adjustment
    • Select the applicable option and submit

    Hope this helps!