ITR
Refund adjusted against an old demand under Section 245
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Facts
The department can set off a refund against tax payable for another year under Sec 245, but it must tell you first. Usually you get a notice on the portal and a chance to say whether the old demand is correct.
Provisions and law
- Sec 245, Income-tax Act 1961 (now Sec 438)A refund can be set off against tax still payable for another year, after intimation to you.
- Sec 220, Income-tax Act 1961A demand is to be paid within the time in the notice of demand, normally 30 days; interest runs if unpaid (2025 Act number to be confirmed).
Analysis
If you do not respond, the demand is treated as confirmed and set off against your refund. Many old demands are wrong, for example TDS credit not given in an old year, or a return processed without a later rectification. Open Pending Actions, Response to Outstanding Demand, and check the old year's details. If it is wrong, disagree with reasons and proof; if it is right, the set-off is valid.
Conclusion
- Log in and open Pending Actions, then Response to Outstanding Demand.
- Open the old year's demand and the order behind it.
- If the demand is wrong, choose disagree and give reasons and documents.
- If a rectification or appeal is pending for that year, mention it.
- Follow up for release of the refund once the old demand is corrected.
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Intimation after processing, Sec 143(1) (now 270(1))
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