Section 245 Notice – Refund Adjustment Against Outstanding Demand: Expert Response Services

Q: What is an Income Tax Section 245 notice?

A Section 245 notice proposes to set off a refund due to the taxpayer against an outstanding tax demand before releasing it. The department must give the taxpayer an opportunity to object within the specified period before making the adjustment.

Q: Can I object to the refund adjustment under Section 245?

Yes. Valid grounds include: the demand is incorrect, already paid, under appeal with a stay, or time-barred. File an objection through the e-filing portal within the specified period (generally 30 days) with supporting documentation.

Q: How do I check my outstanding income tax demands?

Log in to the Income Tax e-filing portal at www.incometax.gov.in and check the Outstanding Demand section under e-Proceedings. All outstanding demands by assessment year and section are listed there.

Q: What happens if the demand being adjusted is incorrect?

File a rectification under Section 154 for errors apparent from the record, an appeal under Section 246A for incorrect assessment orders, or a Section 245 objection with documentary evidence of the demand's incorrectness.

Q: How long does the department take to process Section 245 objections?

Processing time varies — simple objections (paid demand, demand under appeal) can be resolved in weeks; complex cases take longer. Follow-up with the AO or portal grievances can help expedite resolution.

Professional Guidance for Income Tax Section 245 Notices Proposing Adjustment of Refund Against Demand

Under Section 245 of the Income Tax Act, 1961, the Income Tax Department has the power to adjust any refund due to a taxpayer against any outstanding tax demand — before paying out the refund. Before making this adjustment, the department is required to issue an intimation to the taxpayer, proposing the adjustment and giving them an opportunity to object. This communication is commonly referred to as a Section 245 notice. Taxpayers who receive such a notice have a limited window to respond — if no objection is filed within the prescribed time, the department proceeds to make the adjustment, effectively withholding the refund.

Many taxpayers receive Section 245 notices for demands that are disputed, already paid, under appeal, or even time-barred. It is essential to act quickly and correctly to protect your refund. Our team provides expert assistance at every step, integrating with our Section 156 Demand Notice response, Section 147 Income Escaping Assessment guidance, Section 144 Best Judgment Assessment services, and Section 270A penalty advisory to protect your tax rights comprehensively.

Our Section 245 Notice Response Services

Demand Verification & Reconciliation

Detailed review of the outstanding demand cited in the Section 245 notice — verifying its validity, checking whether it has been paid, is under appeal, or is otherwise not payable.

Objection Filing

Preparation and filing of a formal objection to the proposed refund adjustment through the Income Tax portal within the prescribed response period, with full supporting documentation.

Refund Entitlement Analysis

Comprehensive analysis of the refund amount claimed to verify it is correctly computed, fully supported by Form 26AS and AIS data, and that no portion is incorrectly withheld.

Outstanding Demand Clarification

Assistance in addressing the root cause of the outstanding demand — including rectification under Section 154, appeal filing under Section 246A, or correction of TDS credit mismatches.

Rectification Under Section 154

Filing of rectification applications for demands that arise from clerical or computational errors, incorrect processing, or TDS credit mismatches that are clearly apparent from the record.

Appeal Support

Filing of appeals against the underlying demand before CIT(A) under Section 246A, which forms the strongest ground for objecting to the Section 245 refund adjustment.

Why Expert Assistance Is Essential for Section 245 Notices

Section 245 notices have a short response window — missing it results in automatic adjustment and loss of refund without any hearing
Many Section 245 demands are for old disputed amounts — expert verification often reveals the demand is invalid, paid, or appealable
Incorrect or inadequate responses can result in full or partial withholding of legitimate refunds owed to the taxpayer
Professionals ensure all available grounds of objection — paid demand, appeal pending, time-barred demand — are properly raised
Coordinated approach to both the refund and the underlying demand ensures a complete and lasting resolution
Expert follow-up after filing objections ensures the department processes the objection and releases the refund promptly

Frequently Asked Questions – Section 245 Refund Adjustment Notice

What is an Income Tax Section 245 notice?

A Section 245 notice is an intimation from the Income Tax Department proposing to set off (adjust) a refund due to the taxpayer against an outstanding tax demand for the same or any other assessment year, before releasing the refund. The department is legally required to give the taxpayer an opportunity to be heard before making the adjustment. The notice invites the taxpayer to either accept the adjustment or file an objection within the specified time (typically 30 days).

Can I object to the refund adjustment under Section 245?

Yes, absolutely. You should file a response through the Income Tax e-filing portal within the period specified in the notice (generally 30 days from the date of intimation). Valid grounds for objection include: the outstanding demand is incorrect or erroneous; the demand has already been paid; the demand is under appeal before CIT(A), ITAT, or a court and a stay has been granted; the demand is time-barred; or the refund amount has been incorrectly computed. Each ground should be supported by documentary evidence.

How do I check my outstanding income tax demands?

Outstanding income tax demands can be viewed by logging into the Income Tax e-filing portal (www.incometax.gov.in) under the "e-Proceedings" or "Outstanding Demand" section. Each demand shows the assessment year, section under which it was raised, and the outstanding amount. It is important to review all outstanding demands for all assessment years carefully — many taxpayers are surprised to find old, disputed, or incorrectly raised demands that need to be addressed through rectification or appeal.

What happens if the demand being adjusted is incorrect?

If the underlying demand is incorrect or erroneous, the appropriate remedies are: (1) filing a rectification application under Section 154 if the error is apparent from the record; (2) filing an appeal under Section 246A before CIT(A) if the demand arises from an assessment order; or (3) filing a response to the Section 245 notice objecting to the proposed adjustment with full documentary evidence of the incorrectness of the demand. Our professionals assess the most appropriate remedy for the specific type of demand in question.

How long does the department take to process Section 245 objections?

After filing an objection to the Section 245 notice, the Assessing Officer is required to consider the objection and pass a reasoned order. In practice, processing times vary — relatively straightforward objections (such as a paid demand or a demand under appeal with a stay) may be resolved within a few weeks, while more complex cases may take longer. If there is undue delay after filing a proper objection, follow-up representations to the AO and the grievance mechanisms on the portal can help expedite resolution.

Received a Section 245 Notice? Protect Your Refund Now.

Our expert tax professionals will verify the demand, file your objection, and ensure your legitimate refund is released without delay.