What Is This Notice?

A notice under Section 245 of the Income Tax Act, 1961 (renumbered Section 334 under the Income Tax Act, 2025) is issued when the Income Tax Department proposes to adjust — that is, set off — your pending refund against an outstanding tax demand from the same or a different Assessment Year.

The law is unambiguous: the Department cannot adjust a refund against a demand without first giving you a written intimation of the proposed adjustment and providing you at least 30 days to accept or formally object to it. The Supreme Court and various High Courts have consistently held that this intimation is a condition precedent, not a mere formality.

Example: You have a refund of ₹80,000 due for AY 2024-25, but an outstanding demand of ₹1,20,000 exists for AY 2021-22. The Department will issue a Section 245 intimation before adjusting ₹80,000 of your refund against the older demand.

Your Deadline: 30 Days

You have 30 days from the date of receipt of the notice to file your response — either accepting the adjustment or formally objecting to it. This is a statutory deadline and is strictly enforced.

⚠ If you do not respond within 30 days, the adjustment proceeds automatically. Once the refund is adjusted, recovering it becomes significantly harder — you would need to clear the underlying demand entirely or pursue the related appeal to its conclusion.

Where the notice was sent by email and you have not actually received it (spam folder, old email address), raise this immediately in writing with the Assessing Officer and through the portal grievance mechanism.

When Should You Object?

Object formally if any of the following apply to your situation:

  • The underlying demand has already been paid — cite payment details and challan numbers
  • The demand is under appeal and a stay has been granted by CIT(A) or ITAT, or a stay application is pending
  • The demand has been rectified under Section 154 and a revised demand has been issued
  • The demand itself is incorrect — you can dispute its quantum or its legal basis
  • The demand pertains to a different PAN (a data entry error by the Department)
  • The refund being adjusted belongs to a different entity or year than the demand
  • The refund has already been previously adjusted and the demand is partly or fully extinguished

Where the demand is disputed and no stay is in place, you can still object on merit — but explain why the demand is incorrect and what steps you are taking to resolve it (pending appeal, rectification application, etc.).

Steps to Respond

  1. Log in to the Income Tax Portal (incometax.gov.in) using your PAN credentials.
  2. Navigate to e-Proceedings → Response to Outstanding Demand to check the demand details and verify the DIN from your notice.
  3. Select "Disagree with demand" and provide the grounds of disagreement — payment already made, appeal pending, demand incorrect, etc.
  4. Upload supporting documents — challans, appeal papers, rectification orders, stay order (whichever applies).
  5. Additionally, send a written submission (use the template below) to the Assessing Officer by email or RPAD as an additional record, especially for high-value matters.
  6. Save all acknowledgements and submission confirmations on the portal.

Reply Templates — Section 245 Objection

Select the template that matches your situation. Customise the highlighted fields before filing.

To, [AO Designation / CPC, Bengaluru — as applicable] Subject: Response / Objection to Proposed Refund Adjustment under Section 245 of the Income Tax Act, 1961 [For Tax Year 2026-27 proceedings: Section 334 of the IT Act, 2025] PAN: [Your PAN] Notice DIN: [DIN from notice] AY of Refund: [AY XXXX-XX] AY of Demand: [AY XXXX-XX] Respected Sir/Madam, We have received your intimation dated [DATE] under Section 245 of the Income Tax Act, 1961, proposing to adjust the refund of ₹[AMOUNT] for AY [XXXX-XX] against the outstanding demand of ₹[AMOUNT] for AY [XXXX-XX]. We hereby submit that the demand of ₹[AMOUNT] for AY [XXXX-XX] has already been paid vide Challan No. [NUMBER] dated [DATE], BSR Code [CODE]. A copy of the payment challan is enclosed as Annexure A. We request that your goodself kindly: 1. Verify the payment on the portal and update the demand status. 2. Release the refund of ₹[AMOUNT] for AY [XXXX-XX] forthwith. Thanking you, Yours faithfully, [Full Name] PAN: [PAN] Date: [DATE] Enclosures: 1. Copy of Payment Challan No. [NUMBER] dated [DATE]
To, [AO Designation / CPC, Bengaluru — as applicable] Subject: Response / Objection to Proposed Refund Adjustment under Section 245 of the Income Tax Act, 1961 PAN: [Your PAN] Notice DIN: [DIN from notice] AY of Refund: [AY XXXX-XX] AY of Demand: [AY XXXX-XX] Respected Sir/Madam, We have received your intimation dated [DATE] under Section 245 proposing to adjust the refund of ₹[AMOUNT] for AY [XXXX-XX] against the outstanding demand of ₹[AMOUNT] for AY [XXXX-XX]. We submit that the demand of ₹[AMOUNT] for AY [XXXX-XX] is the subject matter of an appeal filed before the CIT(Appeals), [City], vide Appeal No. [NUMBER] dated [DATE]. [USE WHICHEVER APPLIES:] A stay of demand has been granted vide order dated [DATE]. [OR] A stay application is presently pending before CIT(A). We request that the proposed refund adjustment be kept in abeyance pending disposal of the appeal, and that the refund of ₹[AMOUNT] be released to us or held in suspense until the appeal is decided. Thanking you, Yours faithfully, [Full Name] PAN: [PAN] Date: [DATE] Enclosures: 1. Copy of Appeal Filing — Appeal No. [NUMBER] 2. Copy of Stay Order (if granted)
To, [AO Designation / CPC, Bengaluru — as applicable] Subject: Response / Objection to Proposed Refund Adjustment under Section 245 of the Income Tax Act, 1961 PAN: [Your PAN] Notice DIN: [DIN from notice] AY of Refund: [AY XXXX-XX] AY of Demand: [AY XXXX-XX] Respected Sir/Madam, We have received your intimation dated [DATE] under Section 245 proposing to adjust the refund of ₹[AMOUNT] for AY [XXXX-XX] against an outstanding demand of ₹[AMOUNT] for AY [XXXX-XX]. We submit that the demand proposed to be adjusted is incorrect on account of the following grounds: [STATE SPECIFIC GROUNDS. Examples:] • The demand was raised on account of [REASON], which is incorrect because [EXPLANATION]. • The addition of ₹[AMOUNT] on account of [ITEM] is not sustainable because [LEGAL/FACTUAL BASIS]. • A rectification application under Section 154 has been filed vide application dated [DATE] which is pending disposal. Detailed submissions are set out in the attached written note. Supporting documents are enclosed as Annexures A to [X]. In view of the above, we formally object to the proposed refund adjustment. We request that no adjustment be made pending resolution of the underlying demand, and that the refund of ₹[AMOUNT] for AY [XXXX-XX] be released forthwith. Thanking you, Yours faithfully, [Full Name] PAN: [PAN] Date: [DATE] Enclosures: 1. Detailed written note on grounds of objection 2. [Supporting documents — specify]

What Happens After You Object?

Once you submit your response on the portal and/or send a written objection, the Assessing Officer must consider your submissions before proceeding with the adjustment. If your objection is well-founded:

  • The refund will be released if the demand is verified as paid or non-existent.
  • The adjustment will be kept in abeyance if the appeal and stay are confirmed.
  • If the objection is rejected, the AO will pass a speaking order — this order can be challenged in appeal.

For amounts above ₹10 lakh or where the demand is disputed on complex legal grounds, professional representation is strongly recommended before the objection is filed.

IT Act 2025 Note

Section 245 of the Income Tax Act, 1961 is renumbered as Section 334 under the Income Tax Act, 2025 (in force from 1 April 2026). The legal framework — prior intimation, 30-day response window, grounds for objection — remains substantively unchanged. For proceedings relating to Tax Year 2025-26 (AY 2026-27) and earlier, the 1961 Act and its section numbers apply. For Tax Year 2026-27 onwards, cite Section 334.

Last reviewed: June 2026  ·  Based on IT Act 2025 (effective 1 April 2026) and IT Act 1961 as applicable