Income Tax Department issues a demand notice under section 156 to taxpayers when they owe tax, interest, or penalty to the Income Tax Department. The intimation under section 143(1), issued by the Centralised Processing Centre (CPC), Bengaluru, is also considered a notice of demand when it demands the tax due from the taxpayer. Here, we are discussing the step-by-step guide on how taxpayers can respond to the demand notice from the Income Tax Department.
What is a Demand Notice?
Demand Notice under section 156 is the formal communication made by the Income Tax department to the taxpayer regarding the payment of taxes, interest or penalty due to the taxpayer. The payment has to be made within 30 days of the demand notice
Types of (Deemed) Demand Notice under Section 156
The different types of demand notices or deemed demand notices under section 156 are as follows:
Intimation under Section 143(1)
The intimation under section 143(1) is also considered a demand intimation under section 156. The Central Processing Centre (CPC), Bengaluru, issue the intimation under section 143(1) to the taxpayer via email on their registered email address with the Income Tax Department as an acknowledgement that the department has processed the taxpayer’s Income Tax Return. The processing of ITR is done automatically, and the outcome of the ITR processing is intimated to the taxpayer. If the intimation asks for a tax, interest, or penalty to be paid, it is considered a demand notice under section 143(1).
Intimation under Section 200A(1)
Intimation under Section 200A(1) is the intimation issued by the Central Processing Centre (CPC), Bengaluru, regarding tax, interest, or penalty owed on the automatic processing of Tax Deducted at Source (TDS) by the Income Tax Department. It is also considered a demand notice under section 156.
Intimation under Section 206CB(1)
Intimation under Section 206CB(1) is the intimation issued by the Central Processing Centre (CPC), Bengaluru, regarding tax, interest, or penalty owed on the automatic processing of Tax Collected at Source (TCS) by the Income Tax Department. It is also considered a demand notice under section 156.
Payment of Advance Tax under section 210(3)
The demand notice issued by the Assessing Officer for the payment of advance tax under section 210(3) is also considered a demand notice under section 156. This notice under section 210(3) is issued when the Assessing Officer opines that the estimated income of the taxpayer justifies the higher payment of advance tax than paid by the taxpayer.
ESOP
The payment of tax owed on the income of the ESOPs of the eligible start-ups issued to the employees is due within 14 days of the earlier of any of the three events discussed below:
- Date on which the employee leaves the organisation,
- 48 months have passed from the end of the relevant assessment year in which the employee owns these shares, or,
- The date on which shares are sold.
The Centralised Processing Centre (CPC), Bengaluru, issues the intimation for the tax owed on ESOPS’ income. The intimation only sends the amount of tax liability. The payment of tax on ESOPs’ income is deferred until the time as discussed above.
Time Limit To Respond To Demand Notice
The tax, interest or penalty demand intimation under section 143(1), section 200A(1), section 206CB(1) must be paid within 30 days of receiving the intimation. However, the timeline to pay tax is different for ESOP, as discussed above. The payment under section 210(3) must be made within 30 days of the issue of the demand notice under section 156. However, if a demand notice is issued in the middle of the financial year, the due date is according to the due date for the payment of the advance instalment.
Ways to Respond to a Demand Notice
On receiving the demand notice, the taxpayer must assess why the demand notice is being issued and calculate the liability. Based on his assessment and calculations, the taxpayer can respond to the Demand Notice in the following ways:
- Demand is correct
- Demand is partially correct
- Disagree with demand
- Demand is not correct, but agrees to the adjustment
How to Respond to a Demand Notice from the IT Department
Your jurisdictional Income Tax Officer (ITO) will upload the Demand Notice online. You can access the content of this notice by logging into your e-filing account on the website www.incometax.gov.in, where you can record your responses.
Note: As per the latest CBDT Notification, the date for sending intimation under section 143(1) relevant to ITR filed for AY 2023-24(FY 2022-23) has been extended to 25 November 2025, which was initially 31 December 2024.
If you have already paid an outstanding income tax demand, you can resolve the issue by submitting a response on the e-Filing portal of the Income Tax Department. You may also need to take other steps depending on the reason for the mismatch.
How to submit a response on the e-Filing portal
- Log in: Go to the e-Filing portal at incometax.gov.in and log in with your credentials.
- Navigate to Outstanding Demand: On your dashboard, go to Pending Actions > Response to Outstanding Demand.
- Submit your response: Click Submit Response for the relevant demand.
- Agree with the demand: Select the option Demand is correct. Check the disclaimer, which states you cannot disagree with the demand later.
- Provide payment details: Select Yes, already paid and challan has CIN. A Challan Identification Number (CIN) is generated by the bank when you make a tax payment.
- Add challan details: Enter the following details from your paid challan:
- Type of Payment (minor head)
- Challan Amount
- BSR Code (Bank Specific Code)
- Serial Number
- Date of Payment
- Upload challan copy: Click on Attachment to upload a PDF copy of your challan as proof of payment. The maximum file size is 5 MB.
- Submit and confirm: Click Submit to finalize the response. A success message with a transaction ID will be displayed. Save this ID for future reference.
Other actions to take
If the outstanding demand is not resolved through the above steps, consider these additional actions.
Rectification request
If there was a mistake in the original tax return (e.g., an error in quoting the challan details), you can file a rectification request on the e-Filing portal.
- Go to Services > Rectification > New Request.
- Select the relevant Assessment Year and choose the request type Tax credit mismatch correction.
Raise a grievance
If the issue persists, you can raise a formal grievance with the Income Tax Department.
- Log in to the e-Filing portal.
- Go to the Grievances menu and click Submit Grievance.
- Select the relevant department, such as CPC-ITR, and describe the issue with the paid demand.
Contact the Assessing Officer (AO)
If online methods fail, you can contact your Jurisdictional Assessing Officer (AO) directly via email, phone, or by visiting their office. You can find your AO’s details on the e-Filing portal under the Know Your AO quick link.
How to avoid future discrepancies
To prevent this issue from happening again, always reconcile the tax details in your Form 26AS and Annual Information Statement (AIS) with your tax return before filing.
Frequently Asked Questions
What is an IT notice?
An Income Tax notice is an official notification by the Income Tax Department issued to the taxpayer for compliance with the provisions of the Income Tax Act, 1961. The Income Tax Department issues a notice to seek information related to discrepancies in the ITR filed, like mismatches in ITR and Form 26AS and AIS, arithmetic inaccuracies, high-value transactions, refund adjustments, etc or demand action from the taxpayer
What is the time limit for demand notice?
The Income Tax Act grants you 30 days from the date of notice to pay the outstanding amount. In exceptional cases, the assessing officer, with the prior approval of the Joint Commissioner, can reduce or extend the period or allow payment by instalment.
What is the penalty on demand notice?
The penalty under the demand notice is as follows: Under section 220(2), if you fail to pay the demand amount within 30 days of receiving the demand notice, you will be charged 1% simple interest per month or part thereof. Under section 270A, the penalty of 50% for underreporting income and 200% for misreporting income is imposed. A late filing fee for ITR is Rs. 1000 for income up to Rs. 5 lakh and Rs. 5000 for income exceeding Rs. 5 lakh.
Will the refund be adjusted to outstanding demand?
If no action is taken until the date mentioned to respond on demand then the outstanding demand will be adjusted against the refund.
Can I not pay income tax notices?
No, you would have to pay criminal charges, fines and penalties and recovery proceedings if you do not respond to the income tax notice.
Can i file a revised return after receiving a demand notice?
Under 139(5) of the Income Tax Act, 1961 you can file a revised return if you face any discrepancy in the return that you have filed on or before 31 December or before the completion of assessment whichever is earlier. However, if the demand notice is under intimation 143(1), you can file a revised return. If the demand notice is scrutiny assessment order under section 143(3), you can not file revised ITR.