Answer

1. F

   Facts

   The whole ₹5,000 refund will be adjusted, and ₹45,000 will remain payable. Interest on the unpaid demand continues under Sec 220(2) at 1% a month.

2. P

   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)
   • Sec 156, Income-tax Act 1961 (now Sec 289, Income-tax Act 2025)A notice of demand states the tax, interest or penalty payable
3. A

   Analysis

   If you accept the demand, pay the balance soon to stop interest. If you dispute it, file rectification or appeal and ask for a stay. Example: ₹45,000 left unpaid for 6 months adds about ₹2,700 in interest. A senior citizen or salaried person with a genuine but large old demand can ask the officer about paying in instalments, which the officer can allow with reasons.

4. C

   Conclusion

   1. 1Decide whether the demand is correct
   2. 2If correct, agree and pay the balance via e-Pay Tax
   3. 3If wrong, dispute it and file rectification or appeal
   4. 4If payment is hard, ask the officer for instalments
   5. 5Keep the payment challan and update the response

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.