What exactly is Intimation u/s 245?

Intimation u/s 245 is issued by the Income Tax Department to intimate you that they are adjusting your previous year’s pending tax payable with the current year’s refund.

Section 245 gives the Income Tax Department power to adjust any previous year’s demand of tax payable with the current year’s refund. But to exercise this power, it’s mandatory on their part to send intimation u/s 245 to the tax payers and give them opportunity to submit their response on it whether they agree with it or not.

For example, Income Tax Department had raised a demand for tax of Rs 21,000 from Mr. Sharma in the F.Y. 2012-13 after he filed his return. Mr. Sharma did not agree with the demand as the department did not consider his TDS. So, he simply filed for rectification u/s 154 for it and lived peacefully thereafter.

Then came F.Y. 2016-17, Mr. Sharma like every year filed his return, but this time with a refund of Rs 15,000. But instead of getting refund, he got an intimation from the Income Tax Department u/s 245 stating that his refund of Rs 15,000 is being adjusted with the demand raised by the department in the F.Y. 2012-13. This gave Mr. Sharma the goosebumps of the F.Y. 2012-13 when he struggled with that dreaded demand of Rs 21,000 and after consulting with professionals had filed a rectification u/s 154. Apparently, Income Tax Department did not agree with the rectification u/s 154 at that time, and the demand still remained.

Okay, so you’ve received the Intimation u/s 245, now what shall be done?

Once you receive the Intimation u/s 245, read it in and out and check all the details along with the time mentioned within which you can take any action (generally it’s 30 days) because if you do not take any action then the outstanding demand as on that date will be considered for adjustment against your refund.

Now, there are two possibilities, either you agree to the outstanding demand or you do not.

  • 1. If you agree with the Outstanding Demand:

    If you agree with the outstanding demand, then simply log onto www.incometaxindiaefiling.gov.in with your user id and password.
    Go to 'e-file' tab - > Response to outstanding demand - > Submit response - > Demand is correct - > Submit.
    Even if you do not take any action within the stipulated time, then the demand will be automatically adjusted with your refund.

  • 2. If you do not agree/partially disagree with the Outstanding Demand:

    If you do not agree with the outstanding demand, then simply log onto www.incometaxindiaefiling.gov.in with your user id and password.
    Go to 'e-file' tab - > Response to outstanding demand - > Submit response - > Demand is partially correct/Disagree with demand - > Submit.
    In these cases, you’ll have to also submit the reasons for our partial/full disagreement with the demand like Demand Paid, Demand already reduced by rectification/revision, Appeal has been filed, others etc.
    Your work is done, now its upto the department that whether it agrees to your reason or not.

In any case, it’s advisable that you take the advice of a Chartered Accountant before taking any action.

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Frequently Asked Questions

Q- How do I change my refund outstanding demand?

Ans. By submitting the online response,taxpayers need to agree with demand raised by the department and then department will adjust the demand raised and issue an intimation u/s 245.


Q- Can Income Tax Dept. issue a notice under Sec. 245 for a previous year after awarding Certificate of Appreciation for a subsequent year?

Ans. Yes, Notice u/s 245 can be issued by the Department.


Q- Is Income Tax Section 245N(a) (iii) of Advance Ruling applicable for Residents also?

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


Q- What happens if I don't respond to the notice within 30 days?

Ans. If the notice is sent by Assessing Officer and not responded in time, the assessee can attract a penalty.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.