Income Tax Notice Under Section 245 – Meaning and Impact
An Income Tax Notice under Section 245 is issued when the Income Tax Department proposes to adjust your current year’s refund against an outstanding tax demand of a previous assessment year.
This notice is issued before the adjustment is made, giving you an opportunity to review the demand and respond. If no action is taken, the department may proceed with the adjustment automatically.
At N D Savla & Associates, we help taxpayers understand the impact of Section 245 notices and take timely action to protect legitimate refunds.
Meaning of Section 245 Notice
Section 245 empowers the Income Tax Department to:
Adjust income tax refunds
Against outstanding tax demands
After giving the taxpayer an opportunity to respond
The outstanding demand may relate to earlier years and could arise due to assessment orders, penalties, interest, or system mismatches.
Impact of a Section 245 Notice
If the notice is not responded to within the prescribed time:
Your income tax refund may be reduced or fully adjusted
Incorrect or disputed demands may continue to affect future refunds
Cash flow may be impacted unnecessarily
Additional follow-up and rectification may be required later
Once the adjustment is made, reversing it becomes more time-consuming.
What You Should Do on Receiving the Notice
Verify whether the outstanding demand is correct
Check if the demand is already paid, stayed, or under appeal
Decide whether to accept or dispute the adjustment
Submit your response on the income tax portal within the timeline
How We Help
Verification of outstanding tax demand
Advisory on acceptance or dispute of adjustment
Online response filing under Section 245
Rectification and follow-up for incorrect demands
Refund protection and recovery support
Act Before Refund Adjustment
A Section 245 notice directly affects your refund. Ignoring it can cost you money even when the demand is incorrect.
If you have received an Income Tax Notice u/s 245, get professional guidance before responding.
Speak to our tax compliance team today.
