Tag: Income Tax Demand Notices

Income Tax Demand Notices and Clear Outstanding Demands

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:

  1. 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.

  1. Agree with demand.
  2. Fully disagree with demand.
  3. 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.

Further, the taxpayer can also make an application for an extension of the period or for making payment of demand in installments. But in such cases, the taxpayer has to make the application before the end of the 30 days.

Consequences of delay

  • 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.
  • Give reasons for disagreement from the available options.
  • 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.

Online rectification request to fix wrong tax demand notice, intimation is now enabled for up to AY 2023-24

Income Tax Department has enabled filing of rectification applications before an income tax assessing officer (AO) for up to AY 2023-24 (FY 2022-23) through the e-filing Income Tax Return (ITR) portal. This online rectification feature, introduced in January 2025, is particularly useful for individuals seeking to address issues with their submitted ITRs, which the centralised processing centre (CPC) could not process in due time because of some possible errors. As per the income tax law, the CPC is required to process the submitted ITR within nine months from the end of the financial year in which the ITR was filed.

Sometimes the income tax department makes minor mistakes in processing the ITR which are apparent from the records. Some examples of mistakes apparent from official records include: Taxpayer has claimed deductions in original/revised return and same has not been allowed while processing the ITR. Another example can be when a taxpayer has made a correct claim of TDS/TCS/Self-assessment tax/advance tax and the same has not been allowed while processing the ITR.

Do note if the mistake is of such nature that you need to prove it and base it on an interpretation, then the rectification request option can’t be used.

How to use the rectification feature on the e-filing ITR portal?

Here’s a step-by-step guide on how to file an rectification application to the AO:

Step 1: Go to the ITR e-filing portal- https://eportal.incometax.gov.in and login using your credentials.

Step 2: Navigate to the ‘Services’ tab and click on the ‘Rectification’ column. In here you need to click ‘Request to AO seeking rectification’. A new webpage will open and here you need to click on ‘New Request’.

Demand Notices from Income Tax Department Create Confusion for Taxpayers

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.

This Company Faces Rs 962 Crore Inocme Tax Demand

Hindustan Unilever Ltd (HUL) announced on Monday that it has complied with the decision made by the Income Tax assessing officer. The FMCG giant has made a payment of ₹192.55 crore, which amounts to 20% of the total outstanding demand of ₹962.75 crore.

This payment follows a letter dated October 14, 2024, in which HUL stated that it had appealed the assessment order and the associated notice of demand to the Commissioner of Income Tax in Mumbai.

The Company has made a payment of ₹192.55 crore on November 28, 2024, in compliance with the aforementioned direction. The payment was made following the receipt of the said amount under an indemnification claim as per the relevant Sale and Purchase Agreement and therefore does not have any financial implications at this stage,” the company mentioned in its exchange filings.

Nature of the Claim

The claim, which totals ₹329.33 crore including interest, originated from the failure to deduct TDS during the transfer of ₹3,045 crore (EUR 375.6 million) related to the acquisition of the Horlicks brand in India from GSK. This transaction also integrated other GSKCH products into HUL’s portfolio, including Boost, Maltova, and Viva.

HUL reported that the Assessing Officer issued an order on November 6, 2024, instructing the company to pay 20% of the total outstanding demand by November 30, 2024. Recovery proceedings for the remaining amount have been halted.

In light of the submissions made by the Company, the Assessing Officer, via its Order dated November 6, 2024, directed the Company to remit 20% of the total outstanding demand of ₹962.75 crore on or before November 30, 2024, and has put the recovery proceedings for the remaining amount on hold,” the company stated in its press filings.

HUL Q2 FY25 Financial Results

Hindustan Unilever Ltd (HUL) reported a 2.33% decrease in total net profit, amounting to ₹2,595 crore for the second quarter ending September 30, 2024, down from ₹2,657 crore during the same period last year.

Conversely, total sales revenue improved by 2.36% to ₹15,703 crore in the September quarter, compared to ₹15,340 crore in the prior year.

HUL also noted an underlying sales growth of 2% and an underlying volume growth of 3%. Total expenses rose to ₹12,581 crore in the September quarter, an increase of 3.03% year-on-year. The company’s total income, which includes other income, grew by 2.14% to ₹16,145 crore in the September quarter of FY25.

Income Tax Demand Notices and Clear Outstanding Demands Efficiently

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:

  1. 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.

  1. Agree with demand.
  2. Fully disagree with demand.
  3. 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.

Further, the taxpayer can also make an application for an extension of the period or for making payment of demand in installments. But in such cases, the taxpayer has to make the application before the end of the 30 days.

Consequences of delay

  • 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.
  • Give reasons for disagreement from the available options.
  • 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.