ITR
Income tax refund adjusted against an old demand
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Facts
The department can set off your refund against tax outstanding for another year, after informing you. The intimation shows the demand and the adjustment.
Provisions and law
- Sec 245, Income-tax Act 1961 (now Sec 438, Income-tax Act 2025)Refund can be set off against tax due for another year after intimation to the taxpayer.
- Sec 156, Income-tax Act 1961 (now Sec 289, Income-tax Act 2025)Notice of demand for tax payable.
Analysis
Check Pending Actions > Response to Outstanding Demand for the old demand. If the demand is correct, the adjustment settles it. If it is wrong, for example a TDS credit was missed, respond that you disagree with reasons and file rectification. A wrongly adjusted refund can be paid back after the demand is corrected.
Conclusion
- Check the intimation and the old demand details.
- Open Response to Outstanding Demand.
- Agree or disagree with reasons.
- File rectification if the demand is wrong.
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