Section 245 of Income Tax Act

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.

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:

  • Demand is Correct:
    • If you agree with the outstanding demand then you must log in the incometaxefiling portal and enter a response that states that the demand is correct. Not taking any action within the stipulated time would also mean that the taxpayer is agreeing to the outstanding tax demand
  • Disagree with Demand (Either in Full or in Part):
    • If you do not agree with the outstanding tax demand then you need to login to the portal and enter the response stating that you do not agree/partially agree with the demand. In such a situation, you will also have to provide reasons for your response
  • Demand is not Correct but Agree for Adjustment

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.

  4. Notice or Letter pdf

    Click on the notice/letter pdf option.

  5. Submit Response

    Click on the option to submit response.

  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.

  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.

  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.

  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.

  10. Submit Response as Priority

    Enter Set Priority for the order in which the adjustment is favoured and click Submit Response.

  11. Declaration

    Select the Declaration checkbox and click Proceed to e-Verify. 

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.

Rectification under Section 154 of Income Tax Act

What is Rectification Request u/s 154?

As part of the return filing process, the Income Tax Department processes an ITR and sends intimation u/s 143(1) to the taxpayer. Intimation u/s 143(1) matches the data as per ITR filed by the taxpayer with the calculations computed by the Income Tax Department. In the case of a mismatch, the taxpayer has an option to file rectification under section 154 of the Income Tax Act. Both the taxpayer and the assessing officer has the right to make correction in the Income Tax Return. They can file rectification for a time limit of up to 4 years from the end of the financial year.

Prerequisites

  • Registered user on the e-Filing portal with valid user ID and password
  • For registered taxpayers (or Authorized Signatory / Representative Assessee on behalf of the taxpayer):
    • Received an intimation u/s 143(1) of the Income Tax Act, 1961 or u/s 16(1) of the Wealth Tax Act from CPC, Bengaluru
    • Add ERI using the My ERI service (applicable only if the taxpayer wants to engage an ERI)
  • For registered ERI users:
    • Add the taxpayer as a client using the Add Client service
    • ERI status is Active
  • Both registered taxpayers and registered ERI users:
Rectification of Wealth Tax Return can be filed using this service for AY 2014-15 and AY 2015-16 only
Tip
Rectification of Wealth Tax Return can be filed using this service for AY 2014-15 and AY 2015-16 only

Classification of Rectification Requests under section 154 of Income Tax Act

Income Tax Rectification

Reprocess the return

If the taxpayer has furnished correct details in the ITR but CPC has not considered it during the processing

Tax credit mismatch correction

To make correction in details of TDS/TCS/IT Challans and resolve Tax Credit Mismatch

Additional information for 234C interest

To make correction in the calculation of interest under Section 234C for the correct processing of ITR

Status Correction

If the taxpayer has been charged with Maximum Marginal Tax Rates while processing of ITR without giving effect to the correct ‘Status’ and ‘Sub-Status’

Exemption section correction

To make correction in data reported in the ITR by selecting appropriate reasons for correct processing by CPC

Return data correction (Offline)

To make correction in data reported in the ITR by selecting appropriate reasons for correct processing by CPC in offline manner

Return data correction (Online)

To make correction in data reported in the ITR by selecting appropriate reasons for correct processing by CPC in online manner

Wealth Tax Rectification

Reprocess the Return

If the taxpayer has furnished correct details in the wealth tax return but it has not considered during the processing

Tax Credit Mismatch Correction

To make correction in details of Tax Challans and resolve Tax Credit Mismatch

Return Data Correction (XML)

To make correction in data reported in the tax return by selecting appropriate reasons and uploading XML for correct processing

Do not use rectification request for changing bank account or address details of your Income Tax Return
Tip
Do not use rectification request for changing bank account or address details of your Income Tax Return

How to file rectification online under section 154 of Income Tax Act?

  1. Login Income Tax Website

    Login to your e-filing account using your user ID and password.

  2. Rectification Option

    Click on e-File > Rectification option from the dashboard.

  3. New Request

    On the rectification page, click on the option to generate a new request.

  4. Enter Details

    On the New Request page, your PAN will be auto-filled. Select Income Tax or Wealth Tax. Enter the assessment year.

  5. Intimation Reference Number

    If you select the Wealth Tax option, you also need to enter the latest intimation reference number, and click Continue.

View Status of Rectification Report

  • Log in to the e-Filing portal using your user ID and password
  • Click on Services > Rectification Request > Rectification Status
  • On the Rectification Status page, click Rectification Reference Number to view the rectification details based on the Request Type (Income Tax Rectification or Wealth Tax Rectification) submitted by you
  • You can select Take Action or View Details against the Rectification Reference Number

FAQs

When do I need to submit a rectification request?

A request for rectification can be submitted on the e-Filing portal if there is any mistake apparent from record, in an Intimation issued u/s 143(1) or order u/s 154 by the CPC or by the Assessing Officer (where rectification rights are transferred by CPC) . A rectification request can be submitted only for returns that are already processed by CPC.

What are the different request types for wealth tax rectification?

Reprocess the Return, Tax Credit Mismatch Correction and Return Data Correction.

I want to file a rectification against an intimation u/s 143(1) from 5 years ago. Why is the system not allowing it?

You are not allowed to file rectification request after the expiry of 4 years from the end of the FY in which the intimation u/s 143(1) was passed. 

Can I rectify my previously filed ITR using the rectification request service?

If you notice a mistake in your submitted ITR, and it has not processed by CPC, you can submit a revised return. You can use the rectification request service on the e-Filing portal only against an order/notice from CPC.

TDS Refund – How to claim and track refund status

TDS stands for “Tax Deducted at Source“. It is deducted from a taxpayer’s income like salary, interest from bank accounts, rent, etc. It has to be deducted at the rates prescribed by the tax department. The person who is making the payment is responsible for deducting the tax and depositing the same with the government. This person is known as a ‘deductor’. TDS refund arises when TDS collected is more than what you owe to the government.

What is TDS Refund?

TDS refund is about getting a part of the paid TDS tax back into your account from the Government. While filing your income tax return, you should sum up all your income from various sources, find out the tax liability, and subtract the TDS applied to your income. If the tax amount deducted is higher than the actual tax liability for the financial year, it means a refund is due from the government. The sooner you file the income tax return, the earlier you can get the TDS refund.

How to claim a TDS refund

1. When excess tax is deducted by your employer:

  • When the tax deducted does not match your actual tax payable, you can calculate your income and taxes, file an income tax return (ITR), and claim a refund.
  • While filing the ITR online, you will need to provide the details of a bank account and its IFSC code. This makes it easier for the IT department to refund you the excess tax paid.
  • In case you do not have taxable income, you can apply for a lower or NIL TDS certificate. An application for Nil/ Lower deduction of TDS is required to be filed in Form 13 to the Income Tax Officer. You can submit the Nil deduction order passed under section 197 to the TDS deductor.
ITR for NIL Income
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ITR for NIL Income
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2. TDS refund on Fixed Deposit:

  • When your income does not fall into a taxable income bracket, you need to submit a declaration in TDS refund form – Form 15G to your bank to notify them that you don’t have a taxable income. Hence, there should be no TDS on your interest income.
  • This is done to notify the bank about your non-taxable income, because of which TDS should not be deducted from the FD interest income.
  • If the bank deducts tax on your interest income in spite of you submitting the Form 15G declaration, you can claim a refund by filing your ITR.

3. Senior citizens with FD accounts:

  • As per Income Tax Act, Indian citizens above the age of 60 years are exempt from a tax deduction on FD interest earned up to Rs. 50,000 annually.
  • In case you have no taxable income for a Financial Year (after claiming the deduction of up to Rs. 50,000 for interest income), you can submit Form 15H to your bank to notify them that you don’t have a taxable income.
  • If the bank still deducts tax on your interest income from your FD, you can claim a refund by filing your ITR.

How to claim TDS Refund Online?

Follow the below mentioned steps to claim TDS refund online:

  • Visit Income Tax Website
  • If you are not registered, register yourself on the portal
  • Log in using your login credentials
  • File your income tax return by downloading the relevant ITR form
  • Fill in the requisite details, upload the form and click on submit
  • E-verify the submitted form using your digital signature, and your Aadhaar based OTP or net banking account.

How to Track TDS Refund Status?

Usually, it takes approximately 3 to 6 months for the refund to be credited to your bank account. The time it takes for the refund to be credited also depends on the completion of the e-verification. You can check the status of your refund by any of the following methods:

Check Income Tax Refund Status
Track Income Tax Refund online using PAN. The Income Tax Department issues the refund once the ITR is processed. Check your ITR refund status.
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Check Income Tax Refund Status
Track Income Tax Refund online using PAN. The Income Tax Department issues the refund once the ITR is processed. Check your ITR refund status.
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Interest on TDS Refund

If the IT department delays in paying you the TDS refund as applicable, then you are entitled to get a simple interest of 6%. This provision comes under Section 244A of the Income Tax Act. This interest accrues from the first month of the Assessment year when an ITR is filed within the due date and from the date of filing of the returns in any other case.

Note: If the TDS refund amount is less than 10% of the income tax payable, the IT Department needn’t pay this interest. Moreover, the interest, if any, received is liable to be taxed under ‘Income from Other Sources’.

FAQ

What can cause delays or non-transfer of TDS refund?

Any mistake in providing the bank account details may lead to transferring the amount to someone else or delay. To avoid any delay or non-transfer of TDS refund, you must provide the correct bank account details in the TDS certificate or ITR.

Can the deductor cancel the Refund request once submitted?

The Refund request can be cancelled only before Assessing Officer’s (AO) approval. If AO has approved the request, it cannot be cancelled.

Will a person get his TDS refund if he forgets to mention his bank details on the claim form?

No, the IT department will not be able to transfer funds in case he/she forgot to mention the bank details. Also, it is important to mention these details correctly so as to avoid the funds getting transferred to someone else’s account.

Reasons for delay in Income Tax Refund

Most of the taxpayers in India awaits the time when he/she gets the tax refund. The government of India proceeds the refunds after you have filed the tax returns. Taxpayers should file ITR in order to claim a refund of income tax on account of excessive deduction of tax at source or payment of advance tax or self-assessment tax. Many a time there can be a delay in income tax refund. There could be various reasons for not getting the Income Tax Refund including inaccurate information uploads, incomplete filing, wrong bank transactions, etc.

Check Income Tax Refund Status
Track Income Tax Refund online using PAN. The Income Tax Department issues the refund once the ITR is processed. Check your ITR refund status.
Explore
Check Income Tax Refund Status
Track Income Tax Refund online using PAN. The Income Tax Department issues the refund once the ITR is processed. Check your ITR refund status.
Explore

Reasons for delay in income tax refund

Sr. No. Refund Status Meaning Action to be taken

1.

 

Refund not determined Or Your return is pending for processing with the Assessing Officer

Refund request under process. The delay could be at 2 levels:

  • The IT department is taking time to process your request
  • The IT department has already processed but there is a delay at the bank’s end
Make sure that your ITR is E-verified within 120 days from the date of e-filing. If already E-verified you should wait, and check the status after some days
2. Incorrect Account Number provided
The bank account number mentioned at the time of filing your return is wrong
You can make a Refund Reissue request with the correct account details
3. Mismatch in the TDS/TCS claimed This happens because of a mismatch in Form 16 or Form 26AS and TDS/TCS claimed File an online response by logging into the income tax portal or file a revised return
4. ITR processed but submit rectification request This generally happens because of a mismatch in assessee and Tax Department calculations
Check details in intimation received u/s 143(1). Action to be taken accordingly: To submit an online response or file a revised return
5. Defective Return u/s 139 (9) Your return was incomplete or improper Login to your Income Tax India Online account and check for detailed reasons
6. A return submitted but not E-verified You have successfully filed your ITR. But e-verification of the same is still pending E-verify your ITR
7. Return processed and tax demand determined After processing your return the tax department is of view that you should still pay some taxes You can check details in intimation received u/s 143(1) and if not satisfied reply online or make the due payment
8. No Demand No refund found It means your ITR has been duly processed and there was no refund due Check details in intimation received u/s 143(1) and respond accordingly
9. Refund adjusted against Demand You had a refund payable but the same has been adjusted against some taxes payable for previous years Check notice you must have already received u/s 245 in this regard

To know more about when the income tax refund becomes due, how to claim it, you must read out the guide on Income Tax Refund Status.

FAQ

If I have paid excess tax, how will it be refunded to me?

The excess tax can be claimed as refund by filing your income tax return (ITR). After your return is processed and provided the tax department accepts your refund claim, the amount claimed as refund would be credited back to your bank account

What should one do in case of discrepancies in actual TDS and TDS credit as per Form 26AS?

In such a case, the taxpayer may not be able to claim the credit of the correct TDS. Hence, the taxpayers are advised to confirm the tax credit appearing in Form 26AS and should reconcile the difference if any. If a discrepancy is due to the deductor, then he may file a TDS/TCS correction statement and correct the same.

How to claim a refund for TDS deducted due to late PAN submission?

Your employer can file the “Correction Statement” and provide your PAN information. In this case, you have to file IT return even if your income is below the tax slabs.