You check your income tax refund status, expecting to see when the money will reach your account. Instead, the portal says it has been adjusted against an outstanding demand. The refund you had mentally assigned to a credit card bill or your savings account has apparently found another destination. Before paying anything or clicking “Agree”, find out which demand the department is referring to and whether it is actually outstanding.
An income tax refund adjusted against an outstanding demand means that some or all of your refund has been used to settle tax dues recorded against your PAN. Under Section 245 of the Income-tax Act, 1961, the department can set off a refund against an amount remaining payable after giving written intimation of the proposed action. But a demand appearing on the portal still needs to be checked against your returns, orders and payment records. The practical task is to identify the demand, verify the figures and submit the response that matches your situation.
Has Your Refund Already Been Adjusted, or Is the Adjustment Only Proposed?
Start by reading the wording of the communication carefully. A notice saying your refund is “proposed to be adjusted” gives you an opportunity to respond before the proposed action. A refund status showing “partially adjusted” or “fully adjusted” indicates that an adjustment has already been recorded. These situations need different follow-up, so do not treat every Section 245 communication as confirmation that the money has already been deducted.
To check the refund status, log in to the Income Tax e-Filing Portal and go to e-File → Income Tax Returns → View Filed Returns. Select the relevant assessment year and click View Details to inspect the return’s progress and refund status. The department’s guide distinguishes partial adjustment, full adjustment and refund failure. Save the status and relevant communications together so you have a record of what the portal showed when you checked.
How Do You Identify the Outstanding Demand and Assessment Year?
Go to Pending Actions → Response to Outstanding Demand after logging in. This is where the portal lists outstanding demands and lets you respond to the relevant Demand Reference Number, or DRN. Match the demand entry with the reference in your adjustment notice before taking action. If several demands appear, review each separately rather than assuming that the first entry explains the entire adjustment.
Make a note of the following details from the demand entry and its underlying order:
| Detail | Why It Matters |
|---|---|
| Assessment year | Identifies the return period to investigate |
| Demand reference number | Helps distinguish this demand from other entries |
| Outstanding amount | Shows the balance you need to reconcile |
| Order or intimation reference and date | Identifies the document that created or revised the demand |
| Authority that raised the demand | Helps you direct correction requests to CPC or the Assessing Officer |
| Earlier payments, adjustments and responses | Helps establish whether the balance is still correct |
The assessment year of the demand may differ from the assessment year of the refund. For example, a refund for AY 2026–27 could be proposed for adjustment against a demand for AY 2023–24. In that example, the older demand relates to income for FY 2022–23, so those are the records you need to examine. Looking only at your latest return can leave you checking perfectly good figures while the actual issue sits several years away.
Where Can You Find the Section 245 Adjustment Notice?
On the Response to Outstanding Demand page, look for “Latest Section 245 Notice” or “Section 245 Notice Issued Earlier”. For older notices, the department’s manual says to select the financial year in which the notice was issued. That notice-issue year is different from the assessment year to which the demand relates. Download the notice and note its response deadline.
You also need the document explaining why the demand arose, rather than only the notice proposing to recover it. For a CPC processing demand, look for the relevant processing intimation, commonly under Section 143(1), in your filed-return records. The portal allows you to download returns and intimation orders through its ITR status facilities. If you cannot find the underlying order, request a copy or clarification from the department before accepting an amount you cannot reconcile.
What Should You Check Before Agreeing or Disagreeing?
Put the demand order beside the return filed for that assessment year and compare the calculation. Check income, deductions, tax regime, tax credits, interest and fees to identify where the difference begins. Then review whether a later rectification order, appeal order, payment or previous refund adjustment changed the amount payable. A demand should be assessed against the latest position, not merely the first document that created it.
For a possible tax-credit mismatch, compare the return with your TDS records and tax-payment challans. Check PAN, assessment year, payment date, challan number and the amount claimed, because a payment can exist without having been correctly matched to the return. The department advises contacting the deductor where TDS reporting needs correction and using the appropriate return-correction or rectification process for other mismatches. Our guide to Form 16A can help you understand the non-salary TDS certificates in your records.
Your AIS can provide additional information about reported transactions, tax payments, demands and refunds. Use it to support the reconciliation, alongside the actual order and payment evidence. If you need help accessing it, follow Our guide to downloading your AIS statement. Keep your explanation focused on the specific difference rather than uploading a large collection of documents without showing how they connect.
Which Response Should You Submit on the Portal?
The appropriate response depends on whether the demand calculation is correct and whether it has been settled. The portal provides options for accepting the demand, recording an already-paid demand, or disagreeing fully or partly. Its manual warns that after submitting “Demand Is Correct”, you cannot later disagree through that response option. Read that declaration carefully before using acceptance simply to move to the next screen.
Use this distinction when preparing your response:
| Your Finding | Appropriate Direction |
|---|---|
| The demand is correct and remains unpaid | Accept the verified liability and follow the applicable payment or adjustment instructions |
| The demand was correct but has already been paid | Record the payment using the already-paid route and supporting challan |
| The demand calculation or tax credit is wrong | Disagree with reasons and pursue the necessary correction |
| Only part of the demand is correct | Explain the disputed portion and reconcile the accepted balance |
| You cannot establish why the demand exists | Obtain the underlying order and clarification before accepting it |
If you disagree, select the applicable reasons and complete the details required for each one. Explain the disputed amount, the reason it is wrong and the document supporting that position. For a partial disagreement, check the accepted balance against any payment or adjustment already recorded before paying again. Save the submission acknowledgement so that later follow-up refers to a specific response.
What If You Already Paid the Outstanding Demand?
If you accept the demand’s correctness and have already paid it, the official workflow provides “Yes, Already Paid and Challan Has CIN” under the acceptance route. Add the payment type, amount, BSR code, challan serial number and payment date, and attach the challan copy. Submit the response and retain the transaction reference. A bank debit alone is less useful than the challan details needed to trace the tax payment.
However, paying self-assessment tax before filing and later receiving a demand because that credit was missed is a different problem. In that situation, the return or processing record may need correction, rather than a simple confirmation that a subsequently raised demand was paid. The department’s rectification guidance distinguishes Reprocess the Return from Tax Credit Mismatch Correction, depending on what was originally reported and processed. Choose the route that fixes the actual error, using the assessment year of the demand.
Also check whether the payment itself was made against the wrong assessment year or payment head. The portal has a Services → Challan Correction facility, subject to eligibility and time limits. Its published online windows are seven days for assessment-year or tax-year changes and 30 days for major-head or minor-head changes. If online correction is unavailable, approach your Jurisdictional Assessing Officer rather than entering altered challan details that do not match the payment record.
What If the Refund Was Adjusted Even Though the Demand Was Already Paid?
Prepare a reconciliation showing both recoveries against the same liability. For example, if you paid a ₹12,000 demand and a later refund was also reduced by ₹12,000 for that demand, keep the challan and adjustment communication together. State the demand reference, assessment year, payment date, adjustment date and amount. Ask the department to verify the duplicate recovery, correct the outstanding balance and determine the resulting refund due.
Where an apparent error exists in a CPC order, use Services → Rectification and the appropriate CPC option; AO matters need the relevant AO route. You can also raise a grievance for the unresolved demand or refund issue, directing it to CPC-ITR or AO as appropriate. The grievance should reference any demand response or rectification already submitted, so the department can follow the sequence. Filing a request does not itself confirm that the adjustment has been reversed, so check the resulting order and refund status.
If the issue involves a disputed legal interpretation, an appeal or an existing stay order, get help identifying the appropriate remedy and deadline. A portal disagreement, rectification request and formal appeal serve different purposes. Do not assume that submitting one automatically completes the others. The objective is to resolve the demand’s legal and payment position, rather than merely make its entry disappear from the dashboard.
What Are the Frequently Asked Questions About Refund Adjustments?
Can My Current Refund Be Adjusted Against an Older Tax Demand?
Yes, a refund can be set off against an outstanding amount payable under the applicable law after the required written intimation. The demand and refund do not have to relate to the same assessment year. Verify the older demand using that year’s return, orders and payment records. An older date alone does not establish either that the demand is correct or that it has ceased to be payable.
What Happens If I Ignore the Section 245 Notice?
Ignoring the notice can allow the department to proceed on the basis of the outstanding demand recorded against your PAN. The official FAQs warn that an unanswered demand may be adjusted against a refund or remain payable where no refund is available. Respond within the deadline stated in your communication. If the portal prevents submission, document the problem and promptly raise it with the department.
Will Disagreeing With the Demand Automatically Release My Refund?
No, submitting a disagreement is your response, not a decision accepting your explanation. Keep the acknowledgement and monitor any subsequent communication or correction order. If the underlying processing mistake needs rectification, complete that process as well. Follow up using the demand reference and supporting evidence instead of assuming that the submission confirmation settles the matter.
Should I Pay Again If the Portal Still Shows a Demand I Already Paid?
First reconcile the original payment with the exact demand, including any interest or balance that remains. Submit the payment evidence through the appropriate route and investigate any mismatch in the year, amount or payment head. A payment recorded elsewhere does not automatically establish that this particular demand has been fully settled. Equally, a stale portal balance is not a good reason to make an immediate duplicate payment.
Is an Adjusted Refund the Same as a Failed Refund?
No, these are separate statuses in the department’s refund guide. An adjustment uses the refund against a recorded tax demand, while a failed refund concerns an unsuccessful payment to the taxpayer. Correcting bank details does not resolve an incorrect demand adjustment. Check which status applies before deciding what action to take.
What Happens If Only Part of My Refund Is Adjusted?
The adjustment reduces the refund by the amount applied against the demand. For example, if a confirmed ₹30,000 refund is reduced by a ₹10,000 adjustment, the arithmetic leaves ₹20,000, assuming no other adjustments. Check the portal for the status of that remaining amount instead of assuming it has already been credited. Separately verify the ₹10,000 demand if you believe the deduction was incorrect.
Last Updated on 3 hours ago by Team Paisaseekho
