Outstanding Tax Demand Guide: Response Options, Section 245 & Rectification

बकाया आयकर मांग (टैक्स डिमांड) समाधान गाइड

Comprehensive guide to managing outstanding tax demands displayed on the Income Tax e-filing portal under Pending Actions -> Response to Outstanding Demand: analyzing demand origin, submitting statutory responses, preventing wrongful Section 245 refund adjustments, and filing Section 154 rectification requests.

Written by: Author Profile

Direct Tax & CA Review Panel

Chartered Accountancy Review Panel • Senior Direct Tax Review Desk

Reviewed & Fact-Checked by: Technical Review Panel

Tax Law & Dispute Review Desk

Tax Litigation & Legal Review Panel • Tax Appeal & Procedure Review Desk

Published: 1st April 2026•Last Updated: 15th August 2026•Last Reviewed: 15th August 2026

Key Statutory Highlights (FY 2026-27 (AY 2027-28))

Response Options on Portal: (1) 'Demand is Correct' (proceeds to online tax payment), (2) 'Demand is Partially Correct' (pay admitted portion and dispute remainder with reasons), (3) 'Disagree with Demand' (provide reasons such as already paid, rectification filed, appeal pending, or TDS mismatch).

Section 245 Refund Set-Off: If an outstanding demand exists, the department issues a prior intimation giving the taxpayer 30 days to respond before automatically adjusting current year refunds against the outstanding demand.

Section 154 Rectification: If the demand arose due to apparent clerical errors, computational mistakes, or uncredited TDS in Form 143(1), file an online rectification request within 4 years from the end of the FY in which the order was passed.

Stay of Demand: If filing an appeal before CIT (Appeals), you can request a stay of demand from the Assessing Officer upon depositing 20% of the disputed demand amount.

Who is Eligible & When Does it Apply?

Applicability #1

Taxpayers having active tax demands listed on their e-filing portal dashboard.

Step-by-Step Procedure & Compliance Roadmap

Access Outstanding Demand Tab

Review Demand Breakdown & Assessment Year

Check Demand Identification Number, Section under which raised (143(1), 143(3), 147), and outstanding amount.

Select 'Submit Response'

Choose 'Disagree with Demand' if tax was already paid or TDS was not credited by CPC.

Provide Challan CIN or TDS Certificates

Enter BSR code, challan serial number, and upload supporting documents.

Mandatory Documents Checklist

Original Challan 280 / e-Pay Tax payment receipts, Form 16 / 16A TDS certificates, Order u/s 143(1) / 143(3)

Common Mistakes & Compliance Risks to Avoid

•Ignoring Section 245 notices leading to automatic forfeiture of current year tax refunds.

•Paying disputed demands without first checking if a Section 154 rectification can resolve the clerical error.

Frequently Asked Questions

Can the tax department seize bank accounts for unpaid demands?

Yes, under Section 226 of the Income Tax Act, the Tax Recovery Officer (TRO) can issue garnishee notices to banks and employers to attach bank accounts or salary credits if an enforceable demand remains unanswered and unpaid.

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Related Tax Knowledge

Income Tax Notice Guide CIT Appeals Process

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🛡️ Educational Disclaimer: FinSetu India is an independent educational guidance and calculation platform. Content is published for general citizen awareness based on applicable laws as of FY 2026-27 (AY 2027-28). We do not provide personalized legal/tax advice or file returns directly. Verify current applicable rules on official portals or consult a qualified Chartered Accountant / Tax Lawyer.