Notice of Income Tax Adjustment: Meaning, Reasons & What You Should Do

Notice of Income Tax Adjustment: Meaning, Reasons & What You Should Do

You were expecting a tax refund.

But instead, you receive a notice of income tax adjustment.

And suddenly, your refund is either reduced… or completely gone.

Sounds familiar?

This situation is more common than you think. Every year, thousands of taxpayers receive notices related to adjustment. And most of them don’t fully understand what actually happened.

Let’s simplify it.

An income tax adjustment notice is basically the department telling you that they have found a mismatch or outstanding demand—and they are adjusting your refund against it.

It’s not always a penalty. Sometimes, it’s just a correction.

What is a Notice of Income Tax Adjustment?

A notice of income tax adjustment is an official communication sent by the department when there are discrepancies or adjustments in the filed income tax return.

This notice may arise under:

• Section 143(1)(a) – Adjustment during return processing
• Section 245 – Adjustment of refund against past demand

In simple terms, the department is either

• Correcting your return
• Or adjusting your refund against dues

This is also called a Notice of Individual Income Tax Adjustment.

Why Did You Receive This Notice? 

Let’s talk practical.

Here are the most common reasons behind an income tax adjustment notice:

1. TDS Mismatch

Your claimed TDS doesn’t match Form 26AS or AIS.

2. Calculation Errors

Incorrect tax calculation in your return.

3. Wrong Deductions

You claimed deductions that are not allowed.

4. Past Tax Demand

You have unpaid taxes from previous years.

5. Income Mismatch

Income reported by banks or employers is missing in your return.

In all these cases, the department makes an adjustment and informs you.

Section 143(1)(a): Adjustment During Processing

When your return is processed, the system automatically checks for errors.

Under Section 143(1)(a), adjustments can be made for:

• Arithmetic mistakes
• Incorrect claims
• Disallowed deductions
• Income mismatch

After this, you receive an intimation.

This is the most common type of notice of income tax adjustment.

Section 245: Adjustment of Refund Against Demand

This is where most people get confused.

Under Section 245, the department informs the taxpayer of the intention to adjust the refund against any outstanding demand.

For example:

• You have ₹10,000 refund
• But ₹8,000 demand from previous year

👉 The department will adjust it
👉 You receive only ₹2,000

And you’ll get a notice explaining this.

How Will You Know About the Adjustment?

You will receive:

• Email notification
• SMS alert
• Update on e-filing portal

The notice will clearly mention:

• Adjustment details
• Reason
• Amount affected
• Action required

Always read the income tax adjustment notice carefully.

What Should You Do After Receiving the Notice?

Don’t ignore it.

You usually get 30 days to respond.

Here’s what you should do:

Step 1: Read the Notice Properly

Understand why adjustment is made.

Step 2: Verify the Details

Check TDS, income, and past demand.

Step 3: Decide Your Response

You can either agree or disagree.

Step 4: Respond Online

Log in to the portal and submit your response.

How to Respond to Income Tax Adjustment Notice

The process is simple.

1. Login to Income Tax Portal
2. Go to “Pending Actions."
3. Select the notice
4. Choose Agree or Disagree
5. Submit your response

If you disagree, you must provide supporting documents.

What Happens If You Don’t Respond?

If you ignore the notice:

• Adjustment will be processed automatically
• Refund may be reduced or cancelled
• Demand may be confirmed

So always respond within the deadline.

Can You Disagree With the Adjustment?

Yes.

If you think the adjustment is wrong, you can:

• Reject the adjustment
• Submit proof
• File rectification request

For example, if TDS is missing in their records, you can show Form 26AS.

Common Mistakes to Avoid

People often make these mistakes:

Ignoring the notice
Accepting without checking
Missing the deadline
Not verifying old demand
Submitting incomplete reply

These mistakes can cost you money.

How to Avoid Adjustment Notices in Future

To avoid a notice of income tax adjustment, follow these simple steps:

• Match data with AIS and Form 26AS
• File accurate returns
• Pay all tax dues
• Avoid incorrect deductions
• Keep records properly

Small precautions can save you from future issues.

When Should You Take Expert Help?

Some cases are simple.

But you should take help if:

• A large refund is adjusted
• Old demand is incorrect
• You don’t understand the notice
• Multiple notices are received

A professional can help you resolve it faster.

Final Thoughts

A notice of income tax adjustment is not something to panic about.

It simply means the department has made a correction or adjustment in your return.

The key is

👉 Read the notice carefully
👉 Verify the details
👉 Respond within 30 days

Most issues can be resolved easily if handled properly.

Ignoring it is the only real problem.

Don’t Let Your Refund Disappear

Got an adjustment notice and confused why your refund is reduced? Don’t leave money on the table. Let experts review your case—visit Callmyca.com and get your income tax issue resolved quickly and accurately.