ITR refund adjusted against demand: Section 245

Why “ITR refund adjusted against demand” is trending

Searches and posts have spiked around ITR refunds getting reduced due to old demands on the Income Tax portal. Many taxpayers report receiving an intimation under Section 245 and not knowing what it means. The recurring confusion is simple: a refund is visible for one year, but an older demand is also showing up. The department can set off the two and release only the balance, if any. The trigger is usually system identification of both a refundable amount and an outstanding demand under the same PAN. People also miss the response window and later see their refund adjusted automatically. Discussions also highlight that the adjustment can happen much later, when the refund is actually generated. The key theme across posts is that the notice is not the final step, but it does require action.

What a Section 245 intimation actually means

Section 245 of the Income Tax Act, 1961 empowers the Assessing Officer to adjust a refund (fully or partly) against an outstanding demand. In plain terms, the department wants to use money it owes you to recover money you owe it. The outstanding demand can relate to an earlier assessment year. The process is widely described as being handled through CPC workflows, with demands typically originating from a Notice of Demand under Section 156. The portal usually shows the demand details against your PAN. The intimation is meant to give you an opportunity to respond before set-off happens. Social posts repeatedly stress that the department is expected to send this intimation before adjustment. The notice also sets out the timeline within which you can respond.

When the department can adjust your refund

The commonly cited scenario is a current-year refund and a pending tax demand from another year. Once both exist on the system, the refund can be proposed to be adjusted against the demand. The context shared online says the adjustment includes outstanding amount and interest, where applicable. If the refund is smaller than the demand, the refund may get fully absorbed and a balance demand can still remain. If the refund is larger, only part is adjusted and the balance refund can be paid. People also point out a timing issue: the set-off happens when the refund is generated, even if that is years later. This is why some taxpayers see older demands impacting later refunds. The mechanism is framed as a tax recovery tool built into processing and recovery modules. It is still important to verify the demand before accepting the adjustment.

Deadlines: 30 days, and sometimes 21 days

A frequent point in posts is that you must submit your response within 30 days of receiving the Section 245 intimation. If you miss the deadline, the outstanding demand is considered for adjustment against your refund. Some communications referenced in discussions mention 21 days from the date of intimation for certain cases. The same thread of posts also notes an additional 21-day window for the Jurisdictional Assessing Officer (JAO) to submit responses when the taxpayer disagrees. The practical takeaway is that the timeline is stated in your notice and should be followed. Users repeatedly advise reading the intimation carefully and not waiting until the last date. If you do not act, interest on demand may also be considered while adjusting. The key risk highlighted is adjustment happening “without confirmation of the assessee” when there is no response.

What to check before you agree to refund adjustment

Online checklists focus on verifying whether the demand is actually yours and actually outstanding. Start by confirming the demand belongs to your PAN and the assessment year is correct. Verify whether the demand was already paid and whether you have proof such as challans. Check whether the demand was already rectified, reduced, or otherwise corrected earlier. See whether the amount includes interest or fee and whether that matches what the portal shows. Social posts also flag TDS mismatch or processing error as common reasons for old demands to appear. Another point is to check if you already filed a response earlier or if an appeal or rectification is pending. Only after these checks should you decide whether to agree or disagree.

How to respond on the Income Tax e-Filing portal

Reddit and social posts repeatedly direct users to log in and use the portal workflow rather than ignoring the notice. One commonly shared path is to open the dashboard and go to the Worklist option. From there, users look for “Response to Outstanding Demand” or the pending action linked to the Section 245 proposal. The portal allows you to submit a response stating whether you agree or disagree with the demand. If you agree, you typically confirm that the demand is correct, and then the adjustment can proceed. If you disagree, you can disagree fully or partially and provide reasons. Some users mention attaching documents to support the claim, such as proof of payment. After submission, the response is reviewed and the adjustment is based on the records and responses available.

Agree vs disagree: what each option leads to

If you agree with the outstanding demand, the refund due can be adjusted against the demand amount and related interest. If the refund is not enough, discussions say you may need to pay the demand immediately. If you disagree with the demand, you must submit the disagreement on the portal with reasons and documents. Posts describe two variants: fully incorrect demands and partially incorrect demands. For partially incorrect, users are advised to enter both correct and incorrect components and attach supporting paperwork. For fully incorrect, users highlight the need to provide detailed reasons and supporting documents. Another recurring warning is that once you submit “demand is correct,” you may not be able to later disagree with the same demand through that response flow. The overall message is to choose the response carefully after verifying facts.

Interest demand under Section 220(2) and why it shows up

Some posts specifically discuss interest demand under Section 220(2), which arises due to delay in payment of the principal demand for a relevant assessment year. The explanations shared say this can happen even when the principal demand has already been paid or adjusted, but interest remains outstanding. In such cases, users report that the interest demand may be adjusted against the refund. One shared note claims that such interest adjustment “does not require any confirmation,” which is why taxpayers get surprised by the set-off. This is also why verifying the breakup of demand matters, not just the headline amount. If you think the interest is wrongly computed or the principal was not actually pending, the suggested approach is still to respond and provide documentation. Where disagreements are filed, the final adjustment is described as being based on taxpayer and JAO responses on the recovery module. The key is that interest can be part of what gets adjusted if it is outstanding on records.

Quick checklist table: actions and outcomes

The recurring workflow in discussions can be summarised as a simple decision table. This helps taxpayers map what they should do after receiving a Section 245 intimation. It also reflects the repeated advice: respond within the stated timeline and keep proof ready. Users also recommend raising a grievance when an old demand is adjusted unjustly, along with proof of payment or appeal order. Another commonly shared step is to file a rectification request for the earlier year when the demand is due to an error or mismatch. The table below captures only outcomes mentioned in the shared context. Always rely on what your notice and portal show for deadlines and amounts.

What to do next if your refund was adjusted

If your refund is reduced, the first step discussed is to check the outstanding demand details on the e-Filing portal. If you missed the response timeline, posts say the system can proceed with adjustment after considering interest. If the adjustment feels unjust, the commonly shared advice is to respond in writing through the portal process and raise a grievance, attaching proof like challans or appeal orders. Where the dispute relates to an older year’s processing, users also recommend raising a rectification request for that assessment year. If you still have time left on the intimation, submit your response within the deadline stated, often referenced as 30 days. If the refund is due but gets delayed, the set-off can still happen when the refund is eventually generated, as repeatedly noted. The practical approach is documentation-first: keep payment proofs and orders ready before you submit. Most importantly, do not ignore a Section 245 intimation because non-response is repeatedly described as leading to automatic adjustment.