If you’ve ever filed an income tax return & expected a refund, only to receive an unexpected notice, chances are you’ve come across Section 245 of the Income Tax Act. This often-overlooked section plays a crucial role in how the Income Tax Department handles outstanding dues & refunds.
In this blog, we’ll break down Section 245 of the Income Tax Act in simple words, helping you understand what it means, how it affects your tax refunds, & what you should do if you receive an intimation under this section.
What is Section 245 of the Income Tax Act?
Section 245 of the Income Tax Act allows the Income Tax Department to set off refunds against tax remaining payable by an assessee. In simple terms, if you are entitled to a refund but also have pending dues from any previous assessment year, the department can adjust the refund against those dues.
Before making any such adjustment, the Assessing Officer (AO) is required to send you an intimation. This intimation is issued to you notifying you that you have dues pending for a previous year & that the refund you are expecting will be adjusted accordingly.
How Does Section 245 Work?
Let’s understand this through a basic example:
- Suppose you file your income tax return for AY 2024–25 & are eligible for a refund of ₹10,000.
- However, you have an outstanding tax demand of ₹6,000 from AY 2021–22.
- The Assessing Officer, under Section 245 of the Income Tax Act, will send you an intimation explaining that your refund will be reduced by ₹6,000 to clear the earlier dues."
- You will then receive ₹4,000 as your adjusted refund.
Why is Intimation Under Section 245 Issued?
The intimation under Section 245 is not just an arbitrary communication. It is issued to ensure:
- You are aware of past dues that may have been missed or forgotten.
- The taxpayer gets an opportunity to respond or raise objections within the specified time frame.
- The set-off of refunds against tax remaining payable is done transparently.
Common Scenarios Leading to Section 245 Notices:
- Arrears from Previous Assessment Years: Old tax dues that were never cleared.
- Demand Raised After Scrutiny or Processing: You may not have been aware of an additional demand raised by the department.
- Interest or Penalty Adjustments: Sometimes old interest or penalty amounts trigger this section.
What Should You Do When You Receive a Section 245 Intimation?
If you receive an intimation notifying you that you have dues pending for a previous year, here’s what you need to do:
- Log in to the Income Tax Portal & verify the details of the demand.
- If the demand is correct, no action is required, & the refund will be adjusted automatically.
- If you believe the demand is incorrect or already paid, you can submit a response online along with supporting documents.
- Act promptly because the set-off process typically proceeds automatically if no response is filed within the specified time.
Important Points to Remember:
- The Income Tax Department is legally empowered to set off refunds against outstanding tax dues.
- The intimation issued under Section 245 of the Income Tax Act serves as a final reminder.
- Taxpayers must check their previous returns, Form 26AS, & tax demand history to avoid surprises.
- Even if the refund is delayed, you have the right to dispute incorrect demands."
Conclusion: Don’t Let Section 245 Notices Stress You Out!
Receiving an intimation under Section 245 of the Income Tax Act can seem confusing or alarming, but with the right knowledge & timely action, you can handle it smoothly. Whether it’s understanding why your refund was set off against tax remaining payable or disputing incorrect demands, taking action on time is crucial.
If you’re unsure how to deal with such intimations or need help responding to the tax department, Callmyca.com can help you with hassle-free tax filing, compliance, & quick resolution of tax notices. Don’t risk delays or penalties—reach out today & let experts handle it for you while you relax!
