ITR
Agreeing to a correct demand and getting the balance refund
Updated . Every paid answer is checked by a CA. Free AI answers are labelled until a CA verifies them.
Facts
If the demand is correct, choosing Demand is correct lets CPC adjust it and release whatever refund is left. If the demand is larger than the refund, the balance demand stays payable.
Provisions and law
- Sec 245, Income-tax Act 1961 (now Sec 438, Income-tax Act 2025)Refund can be set off against an earlier demand only after a written intimation to the taxpayer
- Sec 220(2), Income-tax Act 1961Interest of 1% a month runs on a demand not paid within the time in the notice (2025 Act number to be confirmed)
Analysis
Example: refund ₹22,000, old demand ₹15,000. After you agree, ₹15,000 is adjusted and ₹7,000 is paid to your validated bank account. If the demand were ₹30,000, the full refund would be adjusted and ₹8,000 would still be due, with interest under Sec 220(2) at 1% a month until paid. Agreeing early avoids delay in getting the balance refund.
Conclusion
- Confirm the demand matches the order for that year
- Choose Demand is correct in the response
- Make sure your bank account is pre-validated for the balance refund
- Pay any balance demand through e-Pay Tax if the refund is smaller
- Keep the adjustment details for your records
A Savvy can do this for you
Refund set-off, Sec 245 (now 438)
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