A notice under section 245 is sent by the Income Tax Department to ask taxpayers if they want to use their current year’s tax refund to cover any tax they owe. This notice gives taxpayers a chance to agree or disagree with the tax demand. This article will look at the details of section 245 of the Income Tax Act.
What is Intimation Under Section 245?
Intimation under section 245 is a notice from the Income Tax Department. It tells you that they plan to use your current year’s tax refund to pay off any unpaid tax from a previous year. Section 245 of the Income Tax Act allows the department to adjust past tax demands with your current year’s refund.
However, they must first send you this notice and give you a chance to respond if you agree or disagree with the adjustment.
Example:
Mr. A had a tax demand of ₹25,000 from the financial year 2012-13, which he disputed because his TDS wasn’t considered. He filed for correction and moved on. In the financial year 2016-17, Mr. A filed his return and expected a refund of ₹20,000.
Instead, he received a notice under section 245 saying his refund would be used to cover the earlier demand. This reminded him of his earlier struggle with the ₹25,000 demand.
In this case, the Income Tax Department can adjust the ₹25,000 demand against the ₹20,000 refund. However, they must send the notice first before making any adjustments.
How to Respond to the Notice Under Section 245
When you get a notice under section 245, follow these steps:
- Read the Notice Carefully: Check all the details and note the deadline for your response (usually 30 days). If you don’t respond in time, the tax department will automatically adjust the unpaid amount against your refund.
- Respond Within the Deadline: You must reply within the specified time. If you don’t, the previous tax demand will be deducted from your current refund.
How to Respond If You Agree with the Demand:
- Log in to www.incometax.gov.in with your user ID and password.
- Go to the “Pending Actions” tab, then select “Response to Outstanding Demand.”
- Choose “Demand is Correct” and submit your response. You can also pay the owed tax directly from this site.
- Make sure to confirm that your submission was successful. If you don’t respond on time, the demand will still be adjusted against your refund.
How to Respond If You Disagree with the Demand:
- Log in to www.incometax.gov.in with your user ID and password.
- Go to the “Pending Actions” tab, then select “Response to Outstanding Demand.”
- Choose “Disagree with Demand” (either fully or partially) and submit your response.
- Provide reasons for your disagreement, such as if the demand was paid or corrected previously, or if you have filed an appeal.
- Verify that your response and reasons were recorded successfully. Keep a record of your submission and follow up with the tax department.
Why You Receive This Intimation
The Income Tax Department sends this notice to adjust any unpaid taxes from past years against your current refund.
This is done to ensure you settle your outstanding tax liabilities.
The notice may be issued due to issues like unaddressed tax payments or discrepancies in your tax filings.
Tip: It’s always a good idea to consult a tax expert before taking any action.
How to Check Your Outstanding Tax Demand
- Log in to the Income Tax Portal using your user ID and password.
- Go to the “View Returns/Forms” tab on the dashboard.
- Click on “Income Tax Returns” to see the details of your filed returns.
- Select the relevant assessment year for which you want to check the details.
- Click on the acknowledgment number for that assessment year to view your filed returns/forms.
- Look for any outstanding demands or tax amounts you owe for that year.
- If you received a notice under section 245, review it for details about the outstanding demand and how it may affect your current refund.
How to File an Online Response to an Outstanding Tax Demand
- Log in to the Income Tax Portal with your user ID and password.
- Go to “Pending Actions” and select “Response to Outstanding Tax Demand.”
- Click on “Submit a Response.”
- After submitting, you’ll see a new screen with two options displayed for your response.
Option 1: If You Agree with the Demand
- Click on “Demand is Correct.”
- A pop-up will appear. Click the submit button.
- You’ll see a confirmation message. If you have a refund, the outstanding amount and any interest will be deducted from it. If there’s no refund, you need to pay the demand immediately.
Option 2: If You Disagree with the Demand (Partially or Fully)
- Click on “Disagree with Demand,” then select “Add Reasons.”
- Choose from the listed options and click “Apply” (you can select multiple reasons).
- For each reason you selected, provide the necessary details on the Response to Outstanding Amount page.
Time Limit to Respond to Intimation Under Section 245
You usually have 30 days to respond to the notice after receiving it. It’s important to submit your response within this time to ensure the Income Tax Department considers your concerns. If you don’t respond, the excess tax demand will be automatically deducted from your current year’s tax refund.
Consequences of Not Responding to the Notice Under Section 245
If you don’t respond within 30 days, the outstanding tax demand will be deducted from your refund. This will happen along with any interest on the unpaid demand for that assessment year. The interest will be automatically adjusted against your refund without needing your confirmation.
How to Find Your Jurisdictional Officer
- Log in to the Income Tax Portal using your user ID and password.
- Click on “My Profile” in the profile icon.
- Select “Jurisdiction Details,” and the relevant information will appear on the screen.
How to Respond to the Assessing Officer
You can respond online, and you only need to follow additional steps if the Income Tax Department specifically requests them. Otherwise, your online response will suffice.
Frequently Asked Questions (FAQs) on Intimation Under Section 245
What is Section 245 Intimation under the Income Tax Act?
Section 245 allows the assessing officer to adjust your current year’s tax refund against any unpaid tax from previous years. The tax department must notify you about this adjustment, and if you don’t respond within the given time, the demand will be automatically deducted from your refund.
How do I change my outstanding tax demand?
You can adjust your outstanding demand by agreeing to it in your online response. Once you do this, the department will make the necessary adjustments and issue a notice under section 245.
Can the Income Tax Department issue a notice under Section 245 for a previous year after giving a Certificate of Appreciation for a later year?
Yes, the department can still issue a notice under section 245 for a previous year, even if you received a Certificate of Appreciation for a subsequent year.
Is Section 245N(a) of the Advance Ruling applicable to residents?
No, Section 245N(a) applies only to non-residents and certain public sector units among residents.
What happens if I don’t respond to the notice within 30 days?
If you don’t respond within 30 days, your unpaid tax from the previous year will be deducted from your current year’s tax refund.
Can I file a revised return after receiving the demand notice?
Yes, you can file a revised return after receiving a notice. According to Section 139(5), you must submit the revised return by December 31 of the Assessment Year.
Can I file a revised return without verifying the original return?
You must verify your original return within 30 days of filing. If you haven’t verified it and need to make changes, first verify the original return, then file the revised return with the necessary updates and verify it again.
