Section 245 Notice What It Means and How to Respond Fast

Section 245 is one of the more unusual income tax notices, not because it's asking you to pay tax, but because the department wants to use money owed to *you* to settle a demand from a previous year. This is called a "set-off", and while it sounds straightforward, it needs to be handled carefully. What Is Section 245? Section 245 of the Income Tax Act allows the IT department to adjust a refund due to you against an outstanding demand from a previous assessment year, but only after giving you a prior intimation and opportunity to respond. So if you're due a ₹40,000 refund for AY 2023-24 but you have an outstanding demand of ₹25,000 from AY 2019-20, the department may send a 245 notice saying it intends to set off ₹25,000 from your refund. What You Need to Do You have two choices: Agree: If the outstanding demand is valid and you accept the set-off, simply respond agreeing to the adjustment. The refund balance after set-off will be credited to your account. Disagree: If you believe the old demand is incorrect (already paid, stayed, or under dispute), you must respond clearly stating your objection and providing evidence. Evidence typically includes: - Challan details of payment already made - Court or tribunal order staying the demand - Previous correspondence confirming the demand was dropped - Rectification order from an earlier application Why Timing Matters The 245 notice will specify a response deadline, usually 30 days. If you don't respond, the department will proceed with the set-off. Once the set-off is executed, getting the money back is a much longer process. If the old demand was genuinely wrong, silence is expensive. Get Your Response Ready Today Noticesahayak helps you draft a clear, documented response to Section 245n, whether you're agreeing with the set-off or contesting the original demand. Upload your notice, answer a few questions, and download your reply PDF.