If you’ve been wondering why your income tax refund hasn’t hit your bank account, it might be due to a notice issued under Section 245(1) of the Income Tax Act, 1961.

This notice, sent by the Income Tax Department, indicates that your tax refund won’t be credited fully or partially because it’s being used to offset your pending income tax liability from previous years.

On September 23, 2023, the tax department said there are a few cases in which refunds are due to the taxpayer, but previous demands are outstanding. In such a scenario, the individual has received a notice under Section 245(1) of the Income-tax Act, 1961.

“Section 245(1) of the Income-tax Act, 1961, mandates providing an opportunity to the taxpayer to make a representation before adjusting the refund against an existing demand. Accordingly, taxpayers with existing demand(s) in the previous years are being intimated of the same,” the tax department said.

Here’s what you need to know about Section 245(1) notice and how to respond if you receive one:

You may receive a Section 245(1) notice if your current year’s income tax refund is being set off against tax liabilities from past years.

If your current year’s tax refund exceeds your past year’s tax liability, the balance refund will be credited to your bank account.

However, if your past tax liability is greater than the current year’s refund, you’ll be required to pay the additional tax liability mentioned in the notice.

If you receive a Section 245(1) notice, you’ll be notified via email and SMS to your registered email ID.

To access and read the notice, log in to your income tax e-filing account.

Check that the notice contains accurate details, including your name, PAN, and the assessment year for which the outstanding demand has been raised.

How to respond to this notice

The notice will specify the time limit for your response, usually 21 days. You have two response options: Agree with the outstanding demand or disagree with it (either in full or part).

If you agree, you can pay the demanded amount, and the matter will be settled. If you disagree, select your reasons from a list provided in the notice.

Your response will be referred to the Assessing Officer (AO), who will decide whether to make the adjustment or not, and if so, the amount to be adjusted for each year.

If you don’t respond within the stipulated time, the income tax department will automatically set off the tax refund against the outstanding demand.

The AO will be responsible for the impact of no response or delays in response.

Therefore, understanding Section 245(1) notices is crucial if you’re awaiting an income tax refund. It’s essential to take prompt and appropriate action in response to the notice to avoid further penalties and ensure your financial affairs are in order.

Source By: indiatoday

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