Intimation or notice u/s 245 is sent by the Income Tax Department to gain consent from taxpayers to offset their tax demand from their current year’s tax refund. This intimation allows the taxpayers to agree to disagree with the tax demand. This article will explore the various aspects of section 245 of the Income Tax Act.
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You can refer to the complete section mapping of Income Tax Act 1961 vs Income Tax Act 2025 here.
Section 245 allows the Income Tax Department to adjust your tax refund against any outstanding tax demand. Before making this adjustment, the department must send you an intimation in writing and give you a chance to respond.
Intimation u/s 245 is a type of notice/intimation issued by the Income Tax Department to inform you that they are adjusting your previous year’s pending tax payable with the current year’s refund.
Section 245 of the Income Tax Act 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 under section 245 of the Income Tax Act to the taxpayers and allow them to submit their response on it whether they agree with it.
For example, the 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 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 a refund, he got an intimation from the Income Tax Department u/s 245 stating that his refund of Rs 15,000 was 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, filed a rectification u/s 154. Apparently, the Income Tax Department did not agree with the rectification u/s 154 at that time, and the demand still remained.
In this case, the Income Tax Department is authorized to send an intimation u/s 245 stating that the previous tax demand due will be adjusted against the current year’s refund payable. Therefore, Rs.21000 will be adjusted against the refund of Rs.15000.
However, it is important to note that the income tax department can only make the adjustment of the refund against the previous demand after sending an intimation about such an adjustment. Don’t lose your refund - Resolve notice with expert help!
Once you receive the Intimation under section 245 of the income tax act, 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.
In other words, as soon as you receive an intimation u/s 245, you must respond to it within the time frame specified in the notice. If you fail to respond to it, the previous outstanding demand will be automatically adjusted against your current year’s refund. Now, let’s understand how you can respond to such a notice.
There are two possibilities, either you agree to the outstanding demand, or you do not.
The Income Tax Department issues an Intimation under Section 245 to adjust any outstanding demand from a previous assessment year against the current year's refund. This adjustment occurs when the taxpayer has an unpaid tax liability from a prior year and a refund available in the current year. This process ensures the taxpayer settles their dues.
The department issues this intimation for reasons such as discrepancies in tax payments, unadjusted demands, or outstanding tax dues not addressed through regular assessment procedures. It helps reconcile past and current tax liabilities.
In any case, it’s advisable that you take the advice of a tax expert before taking any action. Book an online CA now!
Login into your income tax portal with your user ID and password.
Navigate to view returns/forms - once you have logged in, locate and select the view returns/forms tab present on the dashboard.
Select ‘Income Tax returns’ - Click on ‘income tax returns’ from the options available in order to access the details of your filed returns.
Choose the relevant assessment year - From the income tax returns section, select the relevant assessment year for which you want to check the details.
View e-filed returns/forms - Click on the acknowledgment number associated with the desired assessment year to view the filed returns/forms.
Check Outstanding Demand - Examine the information to identify any outstanding demand or tax payable for a particular year.
Review intimation under section 245 - If you have received an intimation under section 245, check the document for details regarding the outstanding demand and the proposed adjustment against the current year refund.
Step 1: Login to your income tax portal with your user ID and password.
Step 2: Select the option of Pending Actions -> Response to Outstanding Tax Demand
Step 3: Click on submit a response
Step 4: After submitting, you will be taken to the given below screen, and 2 options will be displayed.
If the assessees select “Demand is correct,” a pop-up is displayed below. Click on submit button, and a confirmation message is displayed on the screen for accepting the demand and –
If a refund is due, the outstanding amount and the interest will be adjusted against the refund due. Otherwise, you must pay the demand immediately.
Step 1: If the assessees select “Disagree with Demand,” Then Click “Add Reasons”.
Step 2: Select from the options and click Apply. (You can select one or more options.)
Step 3: 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 for which you have submitted the details.
Generally, the recipient of the notice has to respond to the notice within 30 days of receiving the intimation. You must make sure to submit your response within the stipulated time frame to ensure that the Income Tax Department effectively addresses your concerns. If you fail to respond to the notice, the excess tax demand, as computed, will be adjusted against your current year’s tax refund.
If you don’t respond to an intimation under Section 245 of the Income Tax Act within the specified time, the Income Tax Department may take the following actions:
Step 1: Login into your income tax portal with your user ID and password.
Step 2: Select the My Profile in Profile Icon
Step 3: Click on Jurisdiction details, and the below screen will appear
Since the response is being made online, separate compliances in responding to the Assessing Officer are only required if and when specifically asked to do so by the Income Tax Department.
When the Income Tax Department asks you to respond to a notice from the Assessing Officer (AO), you can submit your reply online through the official e-Filing portal. There is no need to visit the tax office unless the department specifically asks you to do so.
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You can download a Section 245 notice directly from the Income Tax e-Filing portal by following these steps:
Before you respond to a Section 245 intimation, make sure you check the following:
Here are the key differences between section 156, section 245 & section 143(1) -
| Basis | Section 245 | Section 156 | Section 143(1) |
|---|---|---|---|
| Purpose | Adjusts refund against outstanding tax demand | Demands payment of tax dues | Communicates result of ITR processing |
| Nature | Intimation before refund adjustment | Demand notice | Intimation |
| When issued | When a refund is due but past demand exists | When tax, interest, or penalty is payable | After ITR processing |
| Payment involved | No direct payment demanded | Payment is required | May show refund, nil demand, or tax payable |
| Refund impact | Refund may be adjusted | Does not adjust refund | May show refund or demand |
| Response required | Yes, if you disagree with adjustment | Yes, payment or reply needed | Only if tax is payable |
| Key point | Prior intimation is mandatory before adjustment | Ignoring it can lead to recovery action | Becomes demand only if tax is payable |
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