ITR
NRI refund adjusted against demand from earlier years
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Facts
Residential status does not change the set-off rule. Any income tax demand on your PAN can be adjusted against your refund after intimation, so you must respond the same way.
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 156, Income-tax Act 1961 (now Sec 289, Income-tax Act 2025)A notice of demand states the tax, interest or penalty payable
Analysis
Check whether the old demand came from a year when your NRI status was wrongly treated, or from TDS credit missing on rent or interest. Example: an NRI with ₹45,000 refund for AY 2026-27 sees a ₹12,000 demand for AY 2019-20 caused by a missed TDS credit on NRO interest. Rectify and dispute it. Make sure your registered email and mobile on the portal are current, since NRIs often miss intimations.
Conclusion
- Update email and mobile in your portal profile
- Check the old demand year and cause
- Respond within 30 days with proof
- File rectification if it is a processing error
- Ensure an Indian bank account is pre-validated for refunds
A Savvy can do this for you
Refund set-off, Sec 245 (now 438)
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