Section 156 Demand Notice - Meaning, Response & Penalties

What is Section 156 of Income Tax Act?

Demand notice under Section 156, also known as an income tax demand notice under section 156 is a notice issued by the assessing officer when any tax, interest, penalty, fine, or any other sum is payable by the assessee as a result of any order passed under the Income Tax Act. After receiving this notification, you have 30 days to settle the amount due.

Types of deemed demand notices under Section 156

The Income Tax Department can issue different types of demand notices or deemed demand notices under Section 156, as explained below:

Intimation under Section 143(1)

The Central Processing Centre (CPC), Bengaluru, issues an intimation under Section 143(1) after processing your Income Tax Return (ITR). The department sends this intimation to your registered email address.

ITR processing happens automatically, and the intimation shows the final outcome. If the intimation asks you to pay any tax, interest, or penalty, it becomes a demand notice under Section 156.

Intimation under Section 200A(1)

The CPC, Bengaluru, issues an intimation under Section 200A(1) after processing TDS details. If this intimation shows any tax, interest, or penalty payable, it is treated as a demand notice under Section 156.

Intimation under Section 206CB(1)

The CPC, Bengaluru, issues an intimation under Section 206CB(1) after processing TCS details. If the intimation shows any tax, interest, or penalty payable, it is also treated as a demand notice under Section 156.

Advance tax demand under Section 210(3)

The Assessing Officer may issue a notice under Section 210(3) if they believe your estimated income requires a higher advance tax payment than what you have paid. This notice is treated as a demand notice under Section 156.

Demand Notice Format Under Section 156

Common Reasons for Receiving Demand Notice u/s 156

• 1. Assessment and Reassessment: If there’s a discrepancy between the tax you paid and what the department calculates you owe, you’ll receive a notice.
• 2. TDS (Tax Deducted at Source) Mismatch: Sometimes, there might be a mismatch between the TDS claimed by you and the records held by the department.
• 3. Undisclosed Income: If during the assessment, it’s found that you have not disclosed some sources of income, the department will demand the tax on that income.
• 4. Disallowance of Deductions or Exemptions: If certain deductions or exemptions you claimed are disallowed, the resultant tax will be demanded through this notice.

What to do after Receiving a Demand Notice?

As soon as you receive a demand notice under section 156 of the Income Tax Act, it must be addressed properly and responded to within the specified time frame. Here are the steps you must follow -

You must read the notice carefully to understand the details of the outstanding amount and to understand whether it is correct or not. Also, make sure that the notice is genuine.

Understand whether the demand is correct or not, whether it is fully correct, partially correct, correct subject to adjustments, or fully incorrect.

How to Respond to an Outstanding Demand Notice?

Step 1: Log in to the e-Filing portal

Log in to www.incometax.gov.in using your User ID (PAN) and password.

Step 2: Go to Outstanding Demand

• On the dashboard, click Pending Actions
• Select Response to Outstanding Demand
• You will see a list of outstanding demands, if any

Note:
If you want to pay the demand immediately, click Pay Now. You will be redirected to the e-Pay Tax page.

Step 3: Submit your response

On the Response to Outstanding Amount page, click Submit Response and choose the appropriate option.

Options to Respond to the Demand Notice

A. If the demand is correct and not yet paid

• Select Demand is correct
  (Once selected, you cannot change this option later.)
  
  
• Choose Not Paid Yet and click Pay Now
• Complete the payment on the e-Pay Tax page

After successful payment, the system shows a success message and transaction ID.

B. If the demand is correct and already paid

• Select Demand is correct
  
  
• Choose Yes, already paid and challan has CIN
• Click Add Challan Details
  
  
• Enter:
  • Type of payment (minor head)
  • Challan amount
  • BSR code
  • Challan serial number
  • Date of payment
• Upload the challan copy (PDF) and click Save
  
  
• Click Submit to complete the response

Note:

• Maximum size per attachment: 5 MB
• Multiple files can be uploaded as a ZIP (up to 50 MB)

After submission, the portal displays a success message with transaction ID.

C. If you disagree with the demand (fully or partially)

• Select Disagree with the demand (in full or in part)
• Click Add Reasons
  
  
• Select the applicable reason(s) and click Apply
  
  
• Enter details for each selected reason and click Submit
  
  
• If you partially disagree, click Pay Now to pay the remaining amount
  
  
• After payment, return to the response page and click Submit
  
  
• Click Confirm to complete the process
  
  

Once submitted, the portal displays the transaction ID as confirmation.

Steps to Respond to Notice Using Different Options

Option 1: Now, if You Click on Demand is Correct

If you agree with the demand, select the Demand is Correct option and the disclaimer on the Response to Outstanding Amount page. “Once you submit the response as “Demand is correct”, then you cannot Disagree with Demand later on” as displayed here:-

On the same page, select the ‘Not paid yet’ option and click Pay Now; then, you will be taken to the e-Pay Tax page where you can make the tax payment. A success message and a Transaction ID are displayed upon successful payment. Please keep a note of the Transaction ID for future reference.

If demand is already paid, select Yes, Already paid, and Challan has CIN. Click Add Challan Details.

To add the challan details, select Type of Payment (minor head), enter Challan Amount, BSR Code, Serial Number, select Date of Payment, and remarks if any(Optional). Click Attachment to upload the copy of the challan (Attachment can be in application/pdf format) and click Save.

NOTE:-

• The maximum size of a single attachment should be 5 MB.
• If you have multiple documents to upload, put them together in a zipped folder and upload the folder. The maximum size of all the attachments in a zipped folder should be 50 MB.

After entering the Challan details, click Submit to submit the response and the details of the challan entered.

On successful validation, a success message is displayed along with a Transaction ID. Please keep a note of the Transaction ID for future reference as shown above.

Option 2: Disagree with demand (Either Partially or in full)

On the Response to Outstanding Amount page, select Disagree with the demand (Either in full or in part) option. Click Add Reasons.

To select the reason(s) for your disagreement, select from the options and click Apply. (You can select one or more options.)

Reasons for Disagreement -

• Demand has already been paid – Here, depending upon applicability 3 types of options are present, One should select the relevant option and then provide the (If available & applicable) Challan Identification Number (CIN), BSR code, date of payment, the serial number of challan and amount.
• Demand has already been reduced by rectification/revision – Provide the date of order, demand amount after rectification, details of AO, etc.
• Demand has already been reduced by appellate order. Still, the appeal effect has to be given by the department – Provide the date of order and the appellate order passed by (details of appellate authority and the reference number of order).
• An appeal has been filed – Depending upon the status, one should select whether the stay petition was filed, or stay has been granted, or the installment facility was granted.
• Rectification/revised return has been filed at CPC – If you select this reason, please provide additional information related to the revised return filed.
• Rectification has been filed with the assessing officer – Mention the date of application and remarks (comments, if any of the taxpayer).
• Others – If there is any other reason apart from mentioned above, then select this reason and provide your comment.

After selecting the appropriate reasons for your disagreement, select each reason you listed in Step 2 on the Response to Outstanding Amount page and enter the appropriate details for each reason.

Note: Completed status will be displayed against the reason you submitted the details.

After submission of details for all the reasons selected, click Pay Now to pay the remaining outstanding amount available in the payment summary (if you partially disagree).

Note: You will be taken to the e-Pay Tax page, where you can make the tax payment. After payment, you will be taken to the Response to Outstanding Amount page; click Submit to submit your response.

Click Confirm to confirm your submission.

A success message and a Transaction ID are displayed on successful submission. Please keep a note of the Transaction ID for future reference.

After Submission, you will get this type of info in response to outstanding demand:-

Time Limit to Respond to the Demand

The assessee shall pay the amount of demand within 30 days from the date of service of notice. However, in some exceptional cases, the assessing officer may reduce the thirty-day period with prior approval of the joint commissioner.
An assessee can also apply to the AO to extend the time for payment or allow payment by installment, provided the application should be made before the expiry of thirty days.

Consequences of Delay/ Penalty for Delay

Interest u/s 220(2) – Interest at a rate of one 1% month or part of the month, which is payable after the expiry of 30 days. Such interest shall be payable by the assessee even if the Assessing Officer has approved the application for an extension of the time period for the payment or allowed payment in installments.

Penalty u/s 221 – A penalty may be imposed by the Assessing Officer up to the amount demanded in the income tax demand notice section 156, provided a reasonable opportunity of being heard is given to the assessee. No penalty shall be levied if the assessee proves that the default was for good and sufficient reasons.

How to Verify if the Demand Notice is Genuine

Before responding to a demand notice under Section 156, make sure it is genuine and issued by the Income Tax Department. You can verify this in two simple ways—by checking the DIN and by authenticating it on the income tax e-filing portal.

1. Check the DIN on the notice

Every valid income tax notice carries a Document Identification Number (DIN). The DIN is usually mentioned on the first page of the notice.

If the notice does not have a DIN, it is not valid in most cases.

2. Verify the notice on the income tax e-filing portal

You can also verify the notice directly on the official income tax website.

Steps to authenticate the notice:

• Visit the Income Tax e-Filing portal (incometax.gov.in).
• Go to Quick Links and click on Authenticate Notice/Order Issued by ITD.
• Enter the DIN and your mobile number, or use PAN and notice details.
• Enter the OTP sent to your mobile number.
• The portal will confirm whether the notice is genuine.

3. Do a quick final check

• Check that the notice appears in your e-Filing account after login.
• Official emails are sent only from government email IDs.
• If the notice does not get authenticated on the portal, do not respond or make any payment until you confirm its validity.

Demand notice vs Intimation u/s 143(1)

Here are the key differences between a demand notice and section 143(1) -

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Income Tax Act 2025 Section Mapping

The following table shows how the sections mentioned in this guide correspond to the Income Tax Act 2025.