Introduction

It can be surprising to find out that your Income Tax Refund has been used to pay an old tax due. But don’t worry — this is a standard process under Section 245 of the Income Tax Act. It means the Income Tax Department is using your refund to clear pending dues from earlier years.

What Is Section 245?

Section 245 allows the Income Tax Department to adjust your refund against any outstanding demand from previous years. Before doing this, they send you a formal notice called an "Intimation under Section 245."

What the Notice Includes:

• The amount of refund due to you
• The amount of outstanding demand
• The year(s) the demand belongs to

You Have 30 Days to Respond

Once you receive the notice, you have 30 days to respond through the Income Tax e-Filing portal. If you don’t respond, the department will assume you agree, and they’ll adjust the refund automatically.

What Happens If You Don’t Respond?

• The refund will be used to pay the old demand
• You may lose the chance to dispute the demand

How to Respond on the Portal

Log in to the Income Tax e-Filing portal and go to the "Response to Outstanding Demand" section. You’ll see three options:

1. Demand is Correct

If you agree with the demand, confirm it. The department will adjust the refund and credit the balance to your account.

2. Disagree with Demand (Full or Partial)

If you think the demand is wrong — maybe you already paid it or it was reduced — choose this option. You’ll need to:

• Give reasons for disagreement
• Upload proof like challans, rectification orders, or appeal documents

The department will review your response. If they agree, you’ll get your full refund. If not, they may still adjust it, but you can take further action.

3. Demand is Not Correct, But Agree for Adjustment

If you disagree with the demand but want to settle it quickly, you can allow the department to adjust the refund anyway. This option is rarely used but available.

Best Practices to Follow

• Respond within 30 days — don’t delay
• Check if the demand is valid — old errors can stay on record
• Keep all tax records — challans, ITR acknowledgments, and notices
• Use the e-Filing portal — everything is done online

Conclusion

Getting a Section 245 notice doesn’t mean you’ve lost your refund. It’s a chance to review and respond. If the demand is wrong, you can dispute it. If it’s correct, you can settle it quickly. Either way, handling it properly helps you keep your tax matters in order.

For more details, visit the official Income Tax e-Filing portal: www.incometax.gov.in

Leave a reply