The process of examining the return filed by the taxpayer by the income tax department is termed assessment. The IT department carries out a preliminary assessment of all the returns filed. If there are arithmetical errors, internal inconsistencies, tax calculation and verification of tax payment discrepancies, the department sends an intimation under section 143(1). The preliminary evaluation process is fully computerised (automated), and is delegated to the Central Processing Centre (CPC).
When Does One Receive an Intimation u/s 143(1)?
Every assessee shall receive the intimation under section 143(1) upon successful processing of the return, for the following reasons:
If a taxpayer has paid excess tax, then it mentions tax refund. A refund will be issued only if the amount is more than Rs.100.
If the tax paid by the taxpayer has fallen short, it mentions the amount of demand and a challan to make the payment.
It’s a simple acknowledgement that the ITR filed by the taxpayer is consistent as per the Assessing Officer.
What does the intimation under Section 143(1) contain?
Usually, a notice under section 143(1) contains the following information:
Date of Notice
PAN
The relevant assessment year
Acknowledgement number of the return filed
Document Identification Number (of the notice)
Income computation, deductions and exemptions, tax paid and payable, as per the assessee’s computation and the department’s computation.
Nature of Adjustments Under 143(1)
Total income or loss is computed under Section 143(1) after making the following adjustments:
Arithmetical error in the return
Any incorrect claim which is apparent from any information in the return where incorrect claim which may include the following:
The claim of an item in the return which is inconsistent with another entry of the same or some other item in such return – for example, income from other sources are deducted from business income but not declared under income from other sources.
Disallowance of set-off of loss in the financial year which is carried forward from previous years in which return was filed beyond the specified due date
Disallowance of expenditure is indicated in the audit report but not indicated in the return of income.
Time Limit for Issue of 143(1)
Section 143(1) intimation has to be sent within nine months from the end of the financial year in which the return is being filed.
For eg: if the taxpayer has filed return pertaining to the financial year 2023-24 in July 2024, intimation can be sent any time till 31 December 2025.
If a taxpayer does not receive any intimation within such period, it simply means there are no adjustments carried out to the return filed by the taxpayer and no change in tax liability/refund, and the acknowledgement filed itself is deemed to be Section 143(1) intimation.
Once the taxpayer receives an intimation under section 143(1), which involves a tax demand, the assessee needs to file an appropriate response within 30 days of issue of the notice.
What is the Password for Intimation u/s 143(1)?
The intimation received under Section 143(1) is password protected. The ITR intimation password will be your PAN (in lowercase) followed by your date of birth in DDMMYYYY format without giving any space.
For example: Assuming your PAN is ABCDE1234E and the date of birth is 01/01/2000, the password to open the intimation will be “abcde1234e01012000”.
Action to be Taken by the Taxpayer after Receiving a 143(1)
As a first step, review certain things in Section 143(1) intimation to ensure the document pertains to your return itself and the data provided pertain to the same financial year as mentioned in Section 143(1) intimation.
Check the name, PAN, address, assessment year for which notice has been sent and e-filing acknowledgement number.
In case you are able to identify the mistakes you have made while filing your return from the 143(1) intimation, and they can be rectified by filing a revised return, please do so by logging into the income tax e-filing website. Please refer our article on how you can go about revising your return online.
However, if no mistakes have been made and you do not agree with the adjustments made by CPC/computerised system, you can file an online rectification application under Section 154(1) intimating the correction of mistake appearing in the Section 143(1) intimation. Refer our article on filing rectification application.
Also, submit your response in the e-filing portal where there is a tax demand- whether you agree or disagree with the same.
In case you are not satisfied with the processing of your rectification return by CPC, you can also file online grievances or contact your assessing officer. In case of no satisfactory action from CPC/assessing officer, you can file a complaint to the income tax ombudsman.
However, if taxpayer agrees to the tax demand raised by income tax department after carrying out adjustments as above, taxpayer is required to pay such taxes. However, while paying tax on demand raised under this Section, please choose ‘Tax on regular assessment (400)’ under ‘Type of payment’ field in the challan. If you wish to pay challan physically, the pre-filled challan is attached with the intimation as below.
Section 156: Notice of Demand and Response Guidelines
Section 156: Notice of Demand: After completing the assessment or re-assessment process, the Income Tax Department takes on the responsibility of determining whether any additional amount needs to be paid by a taxpayer. In case, there is any outstanding liability, the department issues a demand notice under section 156 of the Income Tax Act. This notice specifies the interest, penalties, fines, and any other charges that the taxpayer must pay, along with a time limit for payment.
Notice for Outstanding Demand u/s 156?
If any order is passed under the Income Tax Act and there is an outstanding liability then a notice u/s 156 is issued to the taxpayer. Notice for the sum payable u/s 143(1), 200A (1), 206CB (1), etc., will also be considered as Demand Notice u/s 156. The taxpayer has to pay the amount specified in the notice within 30 days of receipt of the notice.
How to Respond to Outstanding Tax Demand Notice?
For submitting a response to outstanding demand, the taxpayer can follow below-mentioned steps:
Log in to the e-Filing PortalLog in to the e-Filing portal. Navigate to Pending Actions > Response to Outstanding Demand to view a list of your outstanding demands from the dashboard.
2. If you agree pay the demand amounts before submitting a response.
Click on Pay Now to make payment of outstanding demand.
3. Submit Response
If the taxpayer has not paid the demand or disagrees with the demand then they can submit their response accordingly.
Further, the taxpayer has the following options available for submitting a response to the demand notice issued u/s 156.
Agree with demand.
Fully disagree with demand.
Partially disagree with demand.
Option 1: Agree with Demand
Part A- Demand is correct but payment is pending. If you agree with the demand notice, you can select the Demand is Correct option. Moreover, you get an opportunity to pay the dues from here only by selecting Not Paid Yet option. Once the payment is done, the response to the demand will be submitted automatically.
Part B: The demand is correct and amounts are already paid. On the Response to Outstanding Amount page, select the Demand is Correct option and the disclaimer. Then click on the checkbox with Yes, Already paid and Challan has CIN, and Click on Add Challan Details.
Here, input the challan details. After entering the details, upload a copy of the challan (PDF). Once you save the challan details, the system will display a success message along with the transaction ID on the next tab.
Option 2: Fully Disagree with demand.
If you disagree with the demand notice, select Disagree with the demand (Either in full or in part) option and click on Add Reasons.
Then, select the reason(s) for your disagreement from the options and click Apply. (You can select one or more options)
After selecting the appropriate reasons for your disagreement, select each reason you listed on the Response to Outstanding Amount page and enter the appropriate explanation for disagrrement. Once the explanation is saved, submit the response.
Option 3: Partially disagree with Demand.
If taxpayer belives that the outstanding demand is partially correct then they need to submit the reason for disagreement. And for the part of the amount for which the taxpayer agrres they need to make payment.Once the payment is successful, the system will take you to the Response to Outstanding Amount page.In there submit your response. Once the submission is successful, the system will display a success message along with a Transaction ID.
Time limit to respond
The taxpayer has to pay the outstanding demand within 30 days from the date of service of notice. However, in a few cases assessing officers can reduce the period to 30 days where AO feels it is detrimental for the department to allow such a period for payment with the prior approval of the joint commissioner.
Interest u/s 220(2) – Interest at a rate of 1% per month or part of the month will be payable after the expiry of 30 days. Such interest shall be payable by the taxpayer even if the AO has approved the application for an extension of the time period.
Penalty u/s 221 – AO can impose a penalty up to the amount of demand in the outstanding demand notice. However, the AO has to provide a reasonable opportunity of being heard to the taxpayers. Hence, if the taxpayer proves that the default was for bonafide reasons, no penalty shall be levied.
Most Important Query
How do I deal with an income tax demand notice?
Log in to e-Filing portal and click Pending Actions > Response to Outstanding Demand and you will be taken to Response to outstanding demand page. If there are demands outstanding against your PAN, the current status against each of the past / existing outstanding demands will be updated as Pending payment / Response.
What happens if I don’t pay income tax demand?
If the demand is not paid after the final notice, then the department will take action to recover the money by initiating recovery procedures.
What is the time limit for income tax demand notice?
30 days
The timeline to respond to the notice is 30 days from the day of receipt of the notice. If you do not respond within the aforesaid timeline, the assessing officer can consider this as consent and proceed with the assessment.
How to clear outstanding demand in traces?
How can a Deductor make the payment of outstanding demand on TRACES? Deductor can check the total Outstanding Demand from the account on TRACES. To pay the outstanding demand, go to TIN-NSDL website to pay Challan No.ITNS 281.
How do I disagree with demand income tax letter?
Option 3: Disagree with the demand
After choosing this option, explain why you disagree with the department’s call.
Submit your response, following which you will see a success screen with a transaction ID.
Can I ignore income tax notice?
You have 15 days to respond either by meeting your Assessing Officer or online. Ignoring the notice could lead to penalties and interest on unpaid tax.
Can I file a revised return after a demand notice?
If you notice a mistake in your submitted ITR, and it has not processed by CPC, you can submit a revised return. You can use the rectification request service on the e-Filing portal only against an order/notice u/s 143(1) from CPC.
Can income tax demand be paid in installments?
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 installment.
Respond to Outstanding Demand FAQ
1. Why do I need to submit response to an outstanding demand? The Income Tax Department may find some Outstanding Tax demand against your PAN. In order to confirm if the stated demand is correct, an opportunity is given to you to respond. If you do not respond to it, the demand will be confirmed and will be adjusted against your refund (if any) or show as demand payable against your PAN ( in case, no refund is due).
2. How do I know if there is any outstanding demand pending against my PAN? You can check if there is any outstanding demand through the e-Filing portal. Log in to e-Filing portal and click Pending Actions > Response to Outstanding Demand and you will be taken to Response to outstanding demand page. If there are demands outstanding against your PAN, the current status against each of the past / existing outstanding demands will be updated as Pending payment / Response. Accordingly, you can click Pay Now / Submit Response. Additionally, you will receive a message on your email ID and mobile number registered on the e-Filing portal.
3. What can I do if I disagree with the amount of outstanding demand? You can choose Disagree with demand (Either in Full or Part). After you select the option, you need to select from the list of reasons for which you disagree with the amount of demand. After you have selected from the list, you would need to provide details for each of the reasons before you submit your response. In case you partially disagree with the demand, you should pay the portion of the demand which is undisputed (i.e. with which you agree).
4. What can I do if the reason of disagreement with the outstanding demand is not listed? You can select Others as a reason after you choose Disagree with demand (Either in Full or Part). After selection, you can enter the details for your reason and the applicable amount not payable under the mentioned reason.
5. Where can I view the past responses I submitted? After you log in to e-Filing portal, click Pending Actions > Response to Outstanding Demand and you will be to the Response to outstanding demand page. Among the list of past and the existing outstanding demands click on View against the particular demand. You will only be able to see the View option for the demands for which you have already submitted at least one response.
6. While selecting reasons in Response to Outstanding Demand page, I am getting the message – No records found for revised/rectified return for the assessment year. What can I do? Please try again. If the problem persists, please validate the Acknowledgement no. received after submission of your Rectification / Revised Return request.
7. How do I pay the outstanding tax demand? You can make payment of your Income Tax Demand through the e-Filing portal in the following ways:
Directly pay tax by clicking the Pay Now option for the respective DRN (Demand Reference Number) on the Response to Outstanding Demand page; or
Using the Pay Now option while submitting the response to the outstanding demand (in case you agree or you partially agree with the outstanding demand).
8. What are the different ways in which I can make payment? You can make payment through the e-Filing portal. You can use the following online methods to make tax payment:
You can use the following offline methods to make tax payment:
NEFT / RTGS (the Mandate Form generated may be submitted to the bank or used for online transfer using Net-banking); or
Pay over the Counter (through Cash / Cheque / Demand Draft).
Refer to the Make Payment Online and Make Payment Offline user manual to learn more.
9. What if I do not have the copy of the challan to be attached? Where can I find it? You can reprint / regenerate your challan from your respective bank account using Net Banking or visiting the bank branch.
If you’ve received a notice to pay additional tax, it’s important to understand how a rejection of your tax deducted at source (TDS) claim can lead to unexpected payments. The income tax department has a stringent system in place to check for discrepancies between TDS information reported in your income tax return (ITR) and the data supplied by the TDS deductor.
When the TDS is erroneously reported by a deductor, such as a bank that deducts TDS from a fixed deposit but fails to accurately report it, the tax department will deny the TDS claim. Consequently, if there are any outstanding taxes after the ITR filing, you will have to settle the tax liability without the benefit of the TDS credit not reflected in Form 26AS.
Taxpayer data is recorded in Form 26AS, Annual Information Statement (AIS), and Tax Information Summary (TIS) to simplify data verification for ITR filing.
Tax Credit Mismatch in TDS Data: ITR vs. Form 26AS
Discrepancies between TDS data reported in your ITR and that in Form 26AS can occur for several reasons. Upon successful processing of your ITR, you will receive an intimation under section 143(1), which outlines the calculations submitted versus those accepted by the tax authorities. If your TDS credit claim is disallowed, the accepted calculation will reflect a higher tax liability.
Review the amounts for TDS, Tax Collected at Source (TCS), or any other challans.
Compare these amounts with those listed in Form 26AS.
A difference between your submitted amounts and those in Form 26AS indicates a tax credit mismatch.
You will see a message stating “There is a mismatch” if discrepancies exist.
If no discrepancies are found, it will display “Tax Credit Claimed is Fully Matched with Tax Credit Available in Form 26AS.
The income tax department stresses the importance of ensuring that the TDS details provided in Schedule TDS1 and Schedule TDS2 of the ITR form align with the information in Form 26AS, TDS certificates, or Form 16 issued by the deductor. Double-check that the Tax Deduction and Collection Account Number (TAN) of the deductor is correctly entered in the ITR.
Common Causes for Discrepancies in Form 26AS
Discrepancies may occur for various reasons, including:
Occasionally, technical issues within the tax authority’s systems may also contribute to discrepancies between reported TDS and data shown in AIS or Form 26AS.
Steps to Correct TDS Data Mismatch
If the mismatch stems from non-disclosure by the taxpayer, submitting a revised or updated return is advisable to rectify the issue. Taxpayers can file a revised ITR or an updated ITR (ITR-U) if it is within the permissible time frame.
In cases of mismatches due to non-payment of tax or incorrect disclosures, consulting with the related counterparty to rectify the issue is prudent to avoid prolonged disputes. If there are mismatches for other reasons, providing appropriate explanations is crucial.
When filing your ITR, confusion often arises regarding whether to wait for corrections in TDS data or to proceed with the available records. Generally, it is recommended to file the ITR with accurate TDS data based on your records, such as Form 16 or Form 16A. Doing so ensures that discrepancies can be clarified with the income tax department during the rectification process. For significant mismatches, taxpayers might want to wait for the deductor to submit a corrective return to ensure consistency in Form 26AS and AIS. However, if time is of the essence and the deductor has not made necessary corrections, you can still file the return using the TDS data available in Form 26AS or AIS. Be prepared for potential scrutiny or notices from tax authorities in case the mismatch continues.
Correcting Form 26AS Details
To correct details in Form 26AS, the income tax department suggests:
Submitting a correction statement via the NSDL website only for the records requiring updates.
If the error originated with the deductor, you should ask them to:
An unregistered vegetable vendor from the town has received a notice for the non-compliance of new the Goods and Services Tax (GST) laws and a tax demand of Rs 29 lakhs.
Shankargouda Hadimani, who has been running a vegetable shop near the Municipal High School grounds for the last four years, received payments mostly through UPI and other ewallet.
The GST officials had served a notice on the vendor stating, “You have done transactions worth Rs 1.63 crore in the last four years, for which, you have to pay GST of Rs 29 lakh.” Shocked by tax demand, the vendor has stopped accepting payments through UPI.
The Income Tax Department has issued notices to Taxpayers who have been paying a rent of ₹50,000 or more per month and not deducted Tax Deducted at Source (TDS) while remitting the amount to landlord, a tax expert said.
Many taxpayers have received a notice from the Income Tax Department pertaining to the assessment years 2023-2024 and 2024-25 stating that you made a claim of House Rent Allowance (HRA) for specific years and not deducted TDS on that. The notice also states, If you want to file an updated return by reducing your claim, this is the right time to do it, Abhishek Murali, President, All India Tax Payers’ Association said.
These notices have been issued to several taxpayers across the country, he said.
Credit: Getty Images
The Income Tax Department has issued notices to Taxpayers who have been paying a rent of ₹50,000 or more per month and not deducted Tax Deducted at Source (TDS) while remitting the amount to landlord, a tax expert said.
Many taxpayers have received a notice from the Income Tax Department pertaining to the assessment years 2023-2024 and 2024-25 stating that you made a claim of House Rent Allowance (HRA) for specific years and not deducted TDS on that. The notice also states, If you want to file an updated return by reducing your claim, this is the right time to do it, Abhishek Murali, President, All India Tax Payers’ Association said.
Non-performing assets of banks at multi-year low, profits up: Finance Minister
These notices have been issued to several taxpayers across the country, he said.
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“Where you are a tenant of a particular house property and you are paying a rent of ₹50,000 or more, the Income Tax Act mandates that as a tenant you need to deduct TDS of 2% (effective from October 2024 earlier it was 5%) on the rent you are paying to the landlord. So the onus to deduct the TDS is on the tenant. The tenant has to deduct the TDS and remit it to the Income Tax Department and pay the balance to the landlord,” Mr. Abhishek said.
“If the tenant has failed to do so, the person is considered as an assessee in default. Then you are subject to a levy of certain interest, fines and penalties by the Income Tax Department which may vary from 1-1.5% per month depending on the individual cases and time of the default,” he said.
“There is one exemption to this. If the landlord has filed is Income Tax return and shown the rental income and if has paid the taxes duly calculated on the same and if you are able to furnish the information to the assessing officer, you will not be considered as assessee in default and need not pay any interest or penalty,” Mr. Abhishek said.
“However, some landlords may not be comfortable sharing certain confidential/private documents. Therefore, it is advisable that all assessees properly deduct and remit the TDS in a timely manner to comply with the law and to avoid being an assessee in default,” he said.
Private sector lender Tamilnad Mercantile Bank Ltd announced on Tuesday, March 11, that it has received a Notice of Demand under Section 156 of the Income Tax Act, 1961, from the Income Tax Department’s Assessment Unit for the assessment year 2017-18.
In a regulatory filing, Tamilnad Mercantile Bank stated, “We wish to inform you that the Bank has received a Notice of Demand under Section 156 of the Income Tax Act, 1961, from the Assessment Unit, Income Tax Department for the regular assessment under Section 143(3), pertaining to A.Y. 2017-18.”
The notice concerns a tax demand of ₹58.91 crore due to additions and disallowances made during the assessment under Section 143(3). The bank is currently challenging the order in the appropriate forum regarding the disallowances.
“The Bank does not reasonably expect the aforementioned demand notice to have any material impact on its financials, operations, or other activities. The bank is in the process of contesting this demand notice in the appropriate forum,” it stated.
As of the latest trading session, shares of Tamilnad Mercantile Bank Ltd closed at ₹415.00, reflecting an increase of ₹0.45, or 0.11%, on the BSE.
Income Tax Claimed 87A tax rebate for capital gains? Income-Tax Dept sending demand notices. Tax rebate under Section 87A helps taxpayers lower their tax liability under both tax regimes – old and new. Before July 5, taxpayers were allowed to claim this rebate on even special-rate incomes, including short-term capital gains. However, the tax department after July 5 modified the utility for tax-return filers to not allow them to claim a rebate on account of short-term capital gains under 87A.
Now, the tax department has reportedly started sending notices to those taxpayers who claimed 87A rebate on short-term capital gains. A LinkedIn post by TaxBuddy claimed that the tax department is “sending demand notices for claiming rebates to those with capital gains…”
The ITR filing utilities stopped allowing taxpayers to claim rebate under 87A for various special rate incomes including short-term capital gains on stocks or mutual funds taxable under Section 111A. So a big controversy arose after the tax department changed the schema of utility software, resulting in the deactivation of the facility to avail 87A rebate benefits on special-rate incomes.
The Bombay High Court later ruled that the Income Tax Department should not prevent taxpayers from claiming rebates on special-rate income solely due to software restrictions in the tax filing system.
Later, in Budget 2025, the government made its stance clear, saying capital gains, lottery winnings and similar income sources will not be eligible for the rebate.
Meanwhile, the Central Board of Direct Taxes (CBDT) also said that capital gains taxable under sections 111A and 112 will not be considered for enhanced income-tax rebate under section 87A proposed in the Finance Bill 2025.
“It is proposed that where resident individuals opt for the new tax regime of Section 115BAC, the incomes chargeable to tax at special rates (for example, capital gains taxable under Section 111A, Section 112, etc.) shall be excluded from calculating the Section 87A rebate,” the CBDT said in a new document on “Key highlights of Finance Bill 2025” published on its official website on Thursday, February 20, 2025.
The Finance Bill 2025 has proposed to hike the income threshold for claiming a tax rebate under Section 87A for resident individuals taxable under the new regime to Rs 12 lakh from Rs 7 lakh.
The maximum rebate under section 87A has been hiked to Rs 60,000 from the earlier Rs 25,000 under the new tax regime.
The belated ITR deadline was extended to allow this. “Now the IT department is sending notices to those who claimed this rebate,” according to the TaxBuddy.
As per the Memorandum to Finance Bill, 2025, the department’s view is that rebate isn’t allowed for incomes taxable at special rates including: Short-term capital gains u/s 111A at 20%, and long-term capital gains u/s 112A at 12.5%.
The Income Tax (I-T) department has recently issued numerous demand notices to advance taxpayers regarding interest payments. These notices require taxpayers to settle interest charges up until the processing date of their Income Tax Return (ITR). This development has raised concerns among taxpayers and industry representatives alike.
The Gujarat Chamber of Commerce and Industry (GCCI) has taken action by addressing this issue in a letter to the Central Board of Direct Taxes (CBDT). The chairman of GCCI’s direct tax committee pointed out the complexities arising from these notices. He stated, “As per Section 140B(1), tax, interest, and fees must be paid before filing updated returns, and under normal circumstances, no demand notices should be issued. However, recent notices for interest under Section 234B were sent to several taxpayers, despite the taxes being settled before filing, causing confusion and unnecessary burden.”
Sources indicate that Section 234B of the Income Tax Act mandates interest payment for inadequate or non-payment of advance tax. Additionally, Section 140(1) requires assessees to clear income tax, interest, and fees before submitting updated returns, along with payment evidence.
Furthermore, Section 140B(3) stipulates that additional income tax—25% of tax and interest—is applicable for returns filed within 12 months, or 50% if filed within 24 months from the end of the assessment year. The updated ITR submissions must include payment of interest under Sections 234A to 234C as well as any applicable additional income tax.
The primary concern raised does not challenge the validity of the additional income tax rate or the computation method but focuses specifically on the calculation of interest under Section 234B. Recent issues have arisen as taxpayers who filed updated returns after settling their full tax liabilities—including income tax, additional income tax, fees, and interest—are now receiving demand notices following the processing of their returns.
According to the GCCI chairman, the updated return filing utility calculates interest under Section 234B only up to the date the return is filed. In contrast, the intimation issued under Section 143(1) computes interest under Section 234B up to the date of processing of the updated return. He explained, “As a result, taxpayers who met their full tax and interest obligations before filing the updated return are now being asked to pay additional amounts due to delays in the processing of their returns. This has led to confusion and undue financial burden on the affected taxpayers.”
To address this ongoing issue, he suggested an amendment to the Income Tax Act that would incorporate a new sub-section within Section 234B, specifically targeting interest computation for updated returns (ITR-U).
As this situation continues to evolve, affected taxpayers and industry bodies are hopeful for a swift resolution that clarifies the interest calculation and alleviates the financial stress placed upon taxpayers.
The Assistant Commissioner of Income Tax, Mumbai has stayed Income Tax Department regarding the demand order in respect of the Assessment Year 2022-23 for an amount of ₹ 188,78,91,580/-.
The appellate tribunal has directed CG Power and Industrial Solutions to deposit ₹ 4,89,38,029/- and the balance demand stayed till disposal of its appeal before the Commissioner of Income Tax (Appeals).
The Company received an Income Tax Assessment Order for the Assessment Year 2022-23 on 27th February 2024 wherein a demand of ₹ 188,78,91,580/- was raised.
Being aggrieved by the said assessment order, the Company filed an appeal before the Commissioner of Income Tax (Appeals), NFAC, on March 26, 2024, challenging the additions/disallowances made in the said demand.
The Company moved an application for stay of demand before the Assessing Officer on May 2, 2024.
The Disclosure was made under Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
If you’ve received a notice to pay additional tax, it’s important to understand how a rejection of your tax deducted at source (TDS) claim can lead to unexpected payments. The income tax department has a stringent system in place to check for discrepancies between TDS information reported in your income tax return (ITR) and the data supplied by the TDS deductor.
When the TDS is erroneously reported by a deductor, such as a bank that deducts TDS from a fixed deposit but fails to accurately report it, the tax department will deny the TDS claim. Consequently, if there are any outstanding taxes after the ITR filing, you will have to settle the tax liability without the benefit of the TDS credit not reflected in Form 26AS.
Taxpayer data is recorded in Form 26AS, Annual Information Statement (AIS), and Tax Information Summary (TIS) to simplify data verification for ITR filing.
Tax Credit Mismatch in TDS Data: ITR vs. Form 26AS
Discrepancies between TDS data reported in your ITR and that in Form 26AS can occur for several reasons. Upon successful processing of your ITR, you will receive an intimation under section 143(1), which outlines the calculations submitted versus those accepted by the tax authorities. If your TDS credit claim is disallowed, the accepted calculation will reflect a higher tax liability.
Review the amounts for TDS, Tax Collected at Source (TCS), or any other challans.
Compare these amounts with those listed in Form 26AS.
A difference between your submitted amounts and those in Form 26AS indicates a tax credit mismatch.
You will see a message stating “There is a mismatch” if discrepancies exist.
If no discrepancies are found, it will display “Tax Credit Claimed is Fully Matched with Tax Credit Available in Form 26AS.
The income tax department stresses the importance of ensuring that the TDS details provided in Schedule TDS1 and Schedule TDS2 of the ITR form align with the information in Form 26AS, TDS certificates, or Form 16 issued by the deductor. Double-check that the Tax Deduction and Collection Account Number (TAN) of the deductor is correctly entered in the ITR.
Common Causes for Discrepancies in Form 26AS
Discrepancies may occur for various reasons, including:
Occasionally, technical issues within the tax authority’s systems may also contribute to discrepancies between reported TDS and data shown in AIS or Form 26AS.
Steps to Correct TDS Data Mismatch
If the mismatch stems from non-disclosure by the taxpayer, submitting a revised or updated return is advisable to rectify the issue. Taxpayers can file a revised ITR or an updated ITR (ITR-U) if it is within the permissible time frame.
In cases of mismatches due to non-payment of tax or incorrect disclosures, consulting with the related counterparty to rectify the issue is prudent to avoid prolonged disputes. If there are mismatches for other reasons, providing appropriate explanations is crucial.
When filing your ITR, confusion often arises regarding whether to wait for corrections in TDS data or to proceed with the available records. Generally, it is recommended to file the ITR with accurate TDS data based on your records, such as Form 16 or Form 16A. Doing so ensures that discrepancies can be clarified with the income tax department during the rectification process. For significant mismatches, taxpayers might want to wait for the deductor to submit a corrective return to ensure consistency in Form 26AS and AIS. However, if time is of the essence and the deductor has not made necessary corrections, you can still file the return using the TDS data available in Form 26AS or AIS. Be prepared for potential scrutiny or notices from tax authorities in case the mismatch continues.
Correcting Form 26AS Details
To correct details in Form 26AS, the income tax department suggests:
Submitting a correction statement via the NSDL website only for the records requiring updates.
If the error originated with the deductor, you should ask them to:
In the Indian taxation system, compliance and timely response to tax notices are crucial to avoid penalties and interest charges. One such important notice is the Income Tax Demand Notice under Section 156 of the Income Tax Act. This notice is issued when the Assessing Officer (A.O.) determines that an assesses owes any tax, interest, penalty, fine, or other sums as a result of an assessment or reassessment. Understanding how to respond to this notice appropriately can save taxpayers from further legal complications and financial burdens Demand under Section 156.
What is Section 156?
Section 156 of the Income Tax Act empowers the Assessing Officer to issue a notice of demand to an assesses, requiring payment of any tax, interest, penalty, or any other sum due. The notice specifies the amount due and the due date, which is typically within 30 days from the date of service of the notice. The intent behind this provision is to inform the taxpayer of their liabilities clearly and ensure that they settle any dues promptly to avoid further complications.
Notice for Sum Payable
Notices issued under Section 143(1), 200A(1), and 206CB(1) are also deemed to be demand notices under Section 156. This means that when an assesses receives a notice under these sections indicating a sum payable, it serves as a notice of demand under Section 156, and the same response mechanisms apply.
How to Respond to an Outstanding Demand Notice?
Responding to an income tax demand notice involves logging into the income tax e-filing portal and navigating through a series of steps to either confirm or contest the demand. Here are the detailed steps to follow:
Login to the Income Tax e-Filing Portal: Use your user ID and password to access your account.
Select the Appropriate Option: Navigate to Pending Actions -> Response to Outstanding Tax Demand.
Submit Response: Click on ‘Submit Response’ to proceed.
Demand is Correct: The taxpayer agrees with the demand.
Demand is Partially Correct: The taxpayer agrees with part of the demand.
Disagree with Demand: The taxpayer contests the entire demand.
Demand is Not Correct but Agrees to adjustment: The taxpayer acknowledges an error but agrees to an adjustment rather than payment.
Scenario 1: Affirming the Accuracy of the Tax Liability and Accepting Demand is Correct
If you agree with the demand, you need to follow these steps:
Select ‘Demand is Correct’: Choose this option if you accept the demand.
Payment Process:
If the demand is not yet paid, select ‘Not paid yet’ and click ‘Pay Now’ to proceed to the e-Pay Tax page for payment.
If the demand has already been paid, select ‘Yes, Already paid’ and provide the Challan Identification Number (CIN), BSR code, serial number, date of payment, and upload a copy of the challan.
Submission: After entering the payment details, submit your response. A success message and Transaction ID will be displayed for future reference.
Scenario 2: Disagree with the Demand
If you disagree with the demand, either fully or partially, follow these steps:
Select ‘Disagree with Demand’: Choose this option to contest the demand.
Add Reasons for Disagreement:
Demand has already been paid: Provide details such as CIN, BSR code, date of payment, serial number of the challan, and amount.
Demand has been reduced by rectification/revision: Provide details of the rectification order.
Demand reduced by appellate order but not reflected: Provide appellate order details.
The notice will specify that the amount should be paid within 30 days from the date of service. However, the Assessing Officer, with prior approval from the Joint Commissioner of Income Tax (JCIT), can shorten this period if deemed necessary for the interests of the Income Tax Department. Demand under Section 156
The Assessing Officer may impose a penalty up to the amount of the demand if the assesses fails to pay within the stipulated period. However, the assesses must be given a reasonable opportunity to be heard before such a penalty is levied. No penalty will be imposed if the assesses can prove that the default was due to reasonable and sufficient causes. Demand under Section 156
Leading FMCG maker HUL said that it has received a demand notice of Rs 962.75 crore from the Income Tax Department and will go in for an appeal against the order.
The notice relates to the non-deduction of TDS on payment of Rs 3,045 crore to GlaxoSmithKline Consumer Healthcare (GSKCH) for the acquisition of Intellectual Property Rights of the Health Foods Drinks (HFD) business consisting of brands such as Horlicks, Boost, Maltova, and Viva, according to a recent exchange filing.
A demand of “Rs 962.75 crore (including interest of Rs 329.33 crore) has been raised on the company on account of non-deduction of TDS as per provisions of Income Tax Act, 1961 while making remittance of Rs 3,045 crore (EUR 375.6 million) for payment towards the acquisition of India HFD IPR from GlaxoSmithKline ‘GSK’ Group entities,” it said.
According to HUL, the said demand order is “appealable” and it will be taking “necessary actions” in accordance with the law prevailing in India.
HUL said it believes it “has a strong case on merits on tax not withheld” on the basis of available judicial precedents, which have held that the situs of an intangible asset is linked to the situs of the owner of the intangible asset and hence, income arising on sale of such intangible assets are not subject to tax in India.
The demand notice was raised by the Deputy Commissioner of Income Tax, Int Tax Circle 2, Mumbai and received by the company on August 23, 2024.
“There should not be any significant financial implications at this stage,” HUL said.
The FMCG major had completed the merger of GSKCH in 2020 following a Rs 31,700 crore mega deal. As per the deal, it had additionally paid Rs 3,045 crore to acquire GSKCH’s brands such as Horlicks, Boost, and Maltova.
In January this year, HUL had received demands for GST (Goods and Services Tax) and penalties totalling Rs 447.5 crore from the authorities.
Bank of Baroda receives ₹1,068 crore demand order from IT Dept: Bank of Baroda (BoB) has received a demand order of ₹1,067.82 crore from the Faceless Assessment Unit, Income Tax Department, pertaining to Assessment Year (AY) 2017-18.
The public sector bank, in an exchange filing, said it is under the process of filing an appeal before the Commissioner of Income Tax (appeals), National Faceless Appeal Centre (NFAC)/ writ petition before the High Court (as may deems fit) against the said order within the prescribed timelines.
“Looking to the precedence/orders of appellate authorities, the bank believes that it has adequate factual and legal grounds to reasonably substantiate its position in the matter.
“Accordingly, the bank expects the entire demand to subside. As such, there is no impact on financial operations or other activities of the bank,” the bank said.
The bank emphasised that it would avail recourse provided in Income Tax Statute against the demand raised in the order.
Section 156: Notice of Demand and Response Guidelines
Section 156: Notice of Demand: After completing the assessment or re-assessment process, the Income Tax Department takes on the responsibility of determining whether any additional amount needs to be paid by a taxpayer. In case, there is any outstanding liability, the department issues a demand notice under section 156 of the Income Tax Act. This notice specifies the interest, penalties, fines, and any other charges that the taxpayer must pay, along with a time limit for payment.
Notice for Outstanding Demand u/s 156?
If any order is passed under the Income Tax Act and there is an outstanding liability then a notice u/s 156 is issued to the taxpayer. Notice for the sum payable u/s 143(1), 200A (1), 206CB (1), etc., will also be considered as Demand Notice u/s 156. The taxpayer has to pay the amount specified in the notice within 30 days of receipt of the notice.
How to Respond to Outstanding Tax Demand Notice?
For submitting a response to outstanding demand, the taxpayer can follow below-mentioned steps:
Log in to the e-Filing PortalLog in to the e-Filing portal. Navigate to Pending Actions > Response to Outstanding Demand to view a list of your outstanding demands from the dashboard.
2. If you agree pay the demand amounts before submitting a response.
Click on Pay Now to make payment of outstanding demand.
3. Submit Response
If the taxpayer has not paid the demand or disagrees with the demand then they can submit their response accordingly.
Further, the taxpayer has the following options available for submitting a response to the demand notice issued u/s 156.
Agree with demand.
Fully disagree with demand.
Partially disagree with demand.
Option 1: Agree with Demand
Part A- Demand is correct but payment is pending. If you agree with the demand notice, you can select the Demand is Correct option. Moreover, you get an opportunity to pay the dues from here only by selecting Not Paid Yet option. Once the payment is done, the response to the demand will be submitted automatically.
Part B: The demand is correct and amounts are already paid. On the Response to Outstanding Amount page, select the Demand is Correct option and the disclaimer. Then click on the checkbox with Yes, Already paid and Challan has CIN, and Click on Add Challan Details.
Here, input the challan details. After entering the details, upload a copy of the challan (PDF). Once you save the challan details, the system will display a success message along with the transaction ID on the next tab.
Option 2: Fully Disagree with demand.
If you disagree with the demand notice, select Disagree with the demand (Either in full or in part) option and click on Add Reasons.
Then, select the reason(s) for your disagreement from the options and click Apply. (You can select one or more options)
After selecting the appropriate reasons for your disagreement, select each reason you listed on the Response to Outstanding Amount page and enter the appropriate explanation for disagrrement. Once the explanation is saved, submit the response.
Option 3: Partially disagree with Demand.
If taxpayer belives that the outstanding demand is partially correct then they need to submit the reason for disagreement. And for the part of the amount for which the taxpayer agrres they need to make payment.Once the payment is successful, the system will take you to the Response to Outstanding Amount page.In there submit your response. Once the submission is successful, the system will display a success message along with a Transaction ID.
Time limit to respond
The taxpayer has to pay the outstanding demand within 30 days from the date of service of notice. However, in a few cases assessing officers can reduce the period to 30 days where AO feels it is detrimental for the department to allow such a period for payment with the prior approval of the joint commissioner.
Interest u/s 220(2) – Interest at a rate of 1% per month or part of the month will be payable after the expiry of 30 days. Such interest shall be payable by the taxpayer even if the AO has approved the application for an extension of the time period.
Penalty u/s 221 – AO can impose a penalty up to the amount of demand in the outstanding demand notice. However, the AO has to provide a reasonable opportunity of being heard to the taxpayers. Hence, if the taxpayer proves that the default was for bonafide reasons, no penalty shall be levied.
Most Important Query
How do I deal with an income tax demand notice?
Log in to e-Filing portal and click Pending Actions > Response to Outstanding Demand and you will be taken to Response to outstanding demand page. If there are demands outstanding against your PAN, the current status against each of the past / existing outstanding demands will be updated as Pending payment / Response.
What happens if I don’t pay income tax demand?
If the demand is not paid after the final notice, then the department will take action to recover the money by initiating recovery procedures.
What is the time limit for income tax demand notice?
30 days
The timeline to respond to the notice is 30 days from the day of receipt of the notice. If you do not respond within the aforesaid timeline, the assessing officer can consider this as consent and proceed with the assessment.
How to clear outstanding demand in traces?
How can a Deductor make the payment of outstanding demand on TRACES? Deductor can check the total Outstanding Demand from the account on TRACES. To pay the outstanding demand, go to TIN-NSDL website to pay Challan No.ITNS 281.
How do I disagree with demand income tax letter?
Option 3: Disagree with the demand
After choosing this option, explain why you disagree with the department’s call.
Submit your response, following which you will see a success screen with a transaction ID.
Can I ignore income tax notice?
You have 15 days to respond either by meeting your Assessing Officer or online. Ignoring the notice could lead to penalties and interest on unpaid tax.
Can I file a revised return after a demand notice?
If you notice a mistake in your submitted ITR, and it has not processed by CPC, you can submit a revised return. You can use the rectification request service on the e-Filing portal only against an order/notice u/s 143(1) from CPC.
Can income tax demand be paid in installments?
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 installment.
Respond to Outstanding Demand FAQ
1. Why do I need to submit response to an outstanding demand? The Income Tax Department may find some Outstanding Tax demand against your PAN. In order to confirm if the stated demand is correct, an opportunity is given to you to respond. If you do not respond to it, the demand will be confirmed and will be adjusted against your refund (if any) or show as demand payable against your PAN ( in case, no refund is due).
2. How do I know if there is any outstanding demand pending against my PAN? You can check if there is any outstanding demand through the e-Filing portal. Log in to e-Filing portal and click Pending Actions > Response to Outstanding Demand and you will be taken to Response to outstanding demand page. If there are demands outstanding against your PAN, the current status against each of the past / existing outstanding demands will be updated as Pending payment / Response. Accordingly, you can click Pay Now / Submit Response. Additionally, you will receive a message on your email ID and mobile number registered on the e-Filing portal.
3. What can I do if I disagree with the amount of outstanding demand? You can choose Disagree with demand (Either in Full or Part). After you select the option, you need to select from the list of reasons for which you disagree with the amount of demand. After you have selected from the list, you would need to provide details for each of the reasons before you submit your response. In case you partially disagree with the demand, you should pay the portion of the demand which is undisputed (i.e. with which you agree).
4. What can I do if the reason of disagreement with the outstanding demand is not listed? You can select Others as a reason after you choose Disagree with demand (Either in Full or Part). After selection, you can enter the details for your reason and the applicable amount not payable under the mentioned reason.
5. Where can I view the past responses I submitted? After you log in to e-Filing portal, click Pending Actions > Response to Outstanding Demand and you will be to the Response to outstanding demand page. Among the list of past and the existing outstanding demands click on View against the particular demand. You will only be able to see the View option for the demands for which you have already submitted at least one response.
6. While selecting reasons in Response to Outstanding Demand page, I am getting the message – No records found for revised/rectified return for the assessment year. What can I do? Please try again. If the problem persists, please validate the Acknowledgement no. received after submission of your Rectification / Revised Return request.
7. How do I pay the outstanding tax demand? You can make payment of your Income Tax Demand through the e-Filing portal in the following ways:
Directly pay tax by clicking the Pay Now option for the respective DRN (Demand Reference Number) on the Response to Outstanding Demand page; or
Using the Pay Now option while submitting the response to the outstanding demand (in case you agree or you partially agree with the outstanding demand).
8. What are the different ways in which I can make payment? You can make payment through the e-Filing portal. You can use the following online methods to make tax payment:
You can use the following offline methods to make tax payment:
NEFT / RTGS (the Mandate Form generated may be submitted to the bank or used for online transfer using Net-banking); or
Pay over the Counter (through Cash / Cheque / Demand Draft).
Refer to the Make Payment Online and Make Payment Offline user manual to learn more.
9. What if I do not have the copy of the challan to be attached? Where can I find it? You can reprint / regenerate your challan from your respective bank account using Net Banking or visiting the bank branch.
Subject: Income Tax Demand Notice under section 143(1) due to mismatch of Tax credit for the Financial Year 2020-21 (AY 2021-22).
Your kind attention is drawn where CPC, Bangalore had raised Income Tax demand under section 143(1) for the Financial Year 2020-21 (Assessment Year 2021-22) against some of the Army Officers.
In this regard it is submitted that O/o PCDA(O), Pune is dealing with payment of Pay and Allowances of the 55,000 Indian Army Officers, being DDO with TAN No. PNEC06129E PCDA(O), Pune is also responsible for the deduction of Income Tax, filing of TDS i.e. Monthly and Quarterly returns and thereafter issue of Form 16 at the end of Financial Year to all the Army Officers in order to enable them to file their Income Tax Return(ITR) in time and correct manner.
Accordingly Form 16 for the Financial Year 2020-21 was issued to all Army Officers. Numerous complaints are now being received from the Army Officers regarding Income Tax demand notice under section 143(1) stating that Form 26AS does not contain/contains partial amount of TDS with respect to the TAN mentioned in schedule TDS.
Hence it is stated that TDS amount deducted from Officer’s Pay and Allowances by O/o the PCDA(O), Pune have been correctly deposited to Income Tax Authority against the Officer’s PAN No. through TDS quarterly return. Total TDS amount has also been reflected in TRACES Part A of Form 16 as well as Form 26AS . The same has been confirmed by O/o the Pr. CCIT, Pune vide their letter No. Pn/PCC/EST/70B-II/PCDA corrs./2022-23/4047 dated 28/09/2022 that TDS amount is correctly reflected in CPC Portal.
In view of the above all the Army Officers are hereby advised and requested to kindly turn down the notice and to file rectification under section 154 with a request to rectify Income Tax Demand Notice served under section 143(1). It is also requested to file rectification through following steps:
(1) Login to incometaxindiaefiling.gov.in (2) Grievances (3) Submit Grievances (4) CPC-ITR (5) Category- Rectification. (6) Sub Category- TDS entries appearing in Form 26AS but credit not allowed. (7) Select Assessment Year (8) Grievance Description –
There is TDS amount of Rs…/- shown in my 26AS but credit allowed is Rs…./-. I request you to please rectify TDS credit given to me as per my Form 26AS. For your reference, I am attaching herewith the copy of my 26AS.
(9) Attach copy of 26AS in “OTHER DOCUMENTS” below and submit grievance.
In this regard it is also requested to contact CPC IT Department through Email id: efilingwebmanager@incometax.gov.in
