Notice Under Section 245 of the Income Tax Act: What is Section 245 and How to Reply

Receiving a notice from the Income Tax Department can be stressful. If you’ve received a “Notice Under Section 245” and are unsure what it means or how to respond, don’t worry. This blog post will guide you through the essentials of Section 245 of the Income Tax Act and provide step-by-step instructions on how to reply to such a notice.

Introduction

Let’s face it, tax matters can be overwhelming for many of us. The jargon, the legalese, and the endless forms can make anyone’s head spin. So, when you receive a notice from the Income Tax Department, it’s natural to feel anxious. One such notice that often causes confusion is the Notice Under Section 245 of the Income Tax Act.

In this blog post, we’ll break down what Section 245 is all about, why you might receive this notice, and how you should respond to it. Our goal is to make this process as simple and stress-free as possible. So, grab a cup of coffee, relax, and let’s dive in.

What is Section 245 of the Income Tax Act?

Section 245 of the Income Tax Act gives the Income Tax Department the authority to adjust any refund due to a taxpayer against any outstanding tax demand. Simply put, if the department owes you a refund but you also owe some tax from previous years, they can use your refund to clear your dues.

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Why Did You Receive a Notice Under Section 245?

There are a few reasons why you might receive a Notice Under Section 245:

1. Pending Tax Dues: The most common reason is that you have pending tax dues from previous years.

2. Refund Adjustment: The department intends to adjust your current year’s refund against those dues.

3. Data Mismatch: There might be discrepancies in the tax records that need to be clarified.

Receiving this notice means that the department has found a discrepancy or an outstanding demand that needs your attention. But don’t worry, it’s not as daunting as it sounds.

How to Reply to a Notice Under Section 245

Responding to an Income Tax Notice can seem intimidating, but with a clear plan, it becomes manageable. Here’s a step-by-step guide to help you navigate through this:

1. Read the Notice Carefully

The first step is to thoroughly read the notice. Pay attention to the details like:

• Assessment Year: Which year does the notice pertain to?
• Demand Amount: How much tax is being claimed?
• Reason for Notice: Why is the adjustment being proposed?

2. Verify the Tax Demand

Next, verify if the tax demand mentioned is accurate. You can do this by:

• Checking Your Records: Compare the notice with your tax records and returns.
• Viewing Your Tax Credit: Check your Form 26AS to see if the tax credits are correctly recorded.

3. Log into Your Income Tax Account

To respond to the notice, you need to log into your account on the Income Tax Department’s e-filing portal. Here’s how:

1. Visit the Income Tax E-Filing Portal.

2. Log in using your PAN and password.

3. Navigate to “E-File” and select “Response to Outstanding Demand”.

4. Respond to the Notice

After logging in, you will see the details of the outstanding demand. You can respond in one of the following ways:

• Agree with Demand: If you agree with the demand, select this option and follow the instructions to pay the outstanding amount.

1. Login: Visit https://www.incometax.gov.in/iec/foportal/ and log in using your user ID and password.
2. Navigate to Pending Actions: Go to the “Pending Actions” tab.
3. Access Response to Outstanding Demand: Select “Response to Outstanding Demand.”
4. Submit Response: Choose “Submit Response.
5. Confirm Demand is Correct: Select “Demand is correct.”
6. Submit: Click on “Submit.”
7. Verification: Verify that your submission has been successfully recorded.

• Disagree with Demand: If you disagree, select this option and provide the necessary details and documentation to support your case.
• Partial Agreement: If you agree with part of the demand, select this option, specify the amount you agree with, and provide documentation for the part you dispute.

5. Submit Supporting Documents

If you disagree with the demand, you will need to provide supporting documents. This might include:

• Challan Receipts: Proof of tax payments made.
• Form 16/16A: TDS certificates from your employer or other deductors.
• Bank Statements: To show transactions related to the tax payments.

6. Submit Your Response

After filling in the required details and attaching the supporting documents, submit your response. You will receive an acknowledgment, which you should save for your records.

7. Follow Up

Sometimes, despite submitting a response, issues might not get resolved immediately. It’s important to follow up:

• Check Status: Regularly check the status of your response on the e-filing portal.
• Contact Support: If needed, contact the Income Tax Department’s helpdesk for assistance.

Conclusion

Receiving a Notice Under Section 245 of the Income Tax Act can be daunting, but it’s a manageable process if you understand the steps involved. The key is to act promptly, verify the details, and respond accurately. By following the steps outlined in this blog post, you can effectively address the notice and ensure that your tax matters are in order.

Remember, tax compliance is not just about avoiding penalties but also about ensuring that your financial records are accurate and up-to-date. So, take a deep breath, follow the steps, and you’ll be able to handle the notice without much hassle.