Intimation Under Section 245 of the Income Tax Act: What You Need to Know

Understanding the provisions under the Income Tax Act is crucial to ensure compliance with tax regulations and avoid any issues with the tax department. One such provision is Section 245, which deals with the intimation of adjustments to be made by the Income Tax Department for various taxpayer accounts. This intimation can significantly impact how your tax liabilities and refunds are managed.

In this blog, we will break down Section 245 in a way that’s easy to understand, including when it applies, what it means for taxpayers, and what action to take when you receive such an intimation.

What is Intimation Under Section 245?

Section 245 of the Income Tax Act, 1961 grants the Income Tax Department the authority to send an intimation to a taxpayer if they plan to adjust the amount of refund due to the taxpayer against any outstanding dues (such as taxes, penalties, or other charges) under the same PAN.

This intimation serves as a formal communication that the government intends to adjust any pending tax liability against the refund amount for the current assessment year.

When Does the Intimation Under Section 245 Apply?

Section 245 applies in the following situations:

1. Outstanding Dues or Liabilities: If there are any pending tax dues (such as taxes payable for previous years), the Income Tax Department may decide to adjust the refund you are entitled to in the current year against these outstanding liabilities.

2. Processing of Income Tax Returns: After your income tax return (ITR) has been processed, if you are eligible for a refund but have unpaid taxes, the government can use this refund to pay off any dues from previous assessments.

3. Adjustment Against Refund: The adjustment occurs only if there is a refund due to the taxpayer, and the government wants to use that amount to settle pending liabilities. This is communicated via Section 245 intimation.

What Does the Intimation Under Section 245 Contain?

When you receive an intimation under Section 245, it will contain important details, including:

1. Details of the Refund: The amount of refund you were initially eligible for.

2. Outstanding Dues: The details of the outstanding dues (such as pending taxes or penalties) that the department intends to adjust.

3. Adjustment Information: How much of your refund is being adjusted against these liabilities.

4. Final Refund: The new amount of refund you will receive after the adjustment.

How to Respond to an Intimation Under Section 245?

While an intimation under Section 245 is not a demand notice, it is important to understand the implications of the adjustment. Here’s what you can do:

1. Review the Adjustment:

   • Thoroughly check the details of the adjustment, including the nature of the outstanding dues and whether the department is right in making the adjustment.

   • You can cross-check your previous tax returns and any outstanding dues to verify the information.

2. Rectify Any Discrepancies:

   • If you believe the adjustment is incorrect, you can file a Rectification request under Section 154. This is applicable if there are errors in the intimation.

   • You may need to provide additional documents or evidence to substantiate your claim.

3. Check for Past Dues:

   • If the department has adjusted the refund towards dues that you were not aware of, ensure that you are not liable for any incorrect or excessive payments. Review your tax records and audit reports to ensure all liabilities have been correctly accounted for.

4. Consult a Tax Expert:

   • If the intimation seems confusing or you’re unsure about the tax department's actions, consulting a tax advisor or tax consultant can help clarify things and guide you on how to proceed.

5. Accept or Dispute the Adjustment:

   • If the adjustment is accurate, there is no further action needed, and you can accept the revised refund amount.

   • If you wish to dispute the adjustment, you must approach the Income Tax Department promptly to file an objection.

Can You Dispute an Intimation Under Section 245?

Yes, you can dispute an intimation under Section 245 if you believe that the adjustment of refund is incorrect. Here are the steps to take:

1. File a Rectification Request: If there is a mistake in the intimation or the outstanding dues mentioned are incorrect, you can file a rectification request under Section 154 of the Income Tax Act.

2. Raise an Objection: If the dispute is not resolved through rectification, you can appeal to the Commissioner of Income Tax (Appeals) or approach the Income Tax Appellate Tribunal (ITAT).

Key Takeaways

• Section 245 of the Income Tax Act allows the Income Tax Department to adjust refunds against any outstanding tax dues.

• The intimation under Section 245 is a formal notice informing taxpayers about the adjustment of their refund amount due to outstanding liabilities.

• You should carefully review the intimation and verify the accuracy of any dues or taxes being adjusted.

• If you believe the adjustment is incorrect, you can file for rectification or appeal the decision through the relevant legal channels.

Conclusion

An intimation under Section 245 is a common procedure used by the Income Tax Department to adjust refunds against outstanding tax liabilities. It’s crucial for taxpayers to stay vigilant and ensure that the intimation is correct, as any discrepancies can lead to disputes. If you’ve received such an intimation, review it carefully and take the necessary steps to address any errors.

For any complex cases or doubts, seeking guidance from a qualified tax professional can help ensure that your taxes are handled accurately, and you avoid unnecessary penalties or delays.

Keywords: Section 245 Intimation, Tax Refund Adjustment, Income Tax Refund, Outstanding Tax Liabilities, Rectification Request, Income Tax Act 1961, Tax Disputes.