What is an income tax demand notice?

An income tax demand notice is a communication from the Income Tax Department stating that you owe additional tax, interest, or penalty. The most common type is a demand raised through a 143(1) intimation — the automated processing of your return by CPC. A formal demand notice under Section 156 is issued after any assessment order (143(1), 143(3), or 147) that results in tax payable. It specifies the amount due and gives you 30 days to pay.

How do I check if I have an outstanding tax demand?

Log in to the Income Tax Portal at incometax.gov.in. Go to Pending Actions → Response to Outstanding Demand. This shows all outstanding demands against your PAN with the assessment year, section, amount, and status. You can also check under e-File → View Filed Forms → Income Tax Returns to see the processing status of each return and whether a demand was raised.

What happens if I don't pay the income tax demand?

If you do not pay or respond to a demand notice within 30 days: (1) Interest under section 220(2) accrues at 1% per month on the unpaid amount, (2) The department can adjust your pending refunds from other years against the demand under section 245, (3) A penalty under section 221 of up to the amount of demand can be levied, (4) In extreme cases, the Tax Recovery Officer can initiate recovery proceedings including attachment of bank accounts, salary, or property. Responding promptly — even if you disagree — avoids all of these consequences.

Can I dispute an income tax demand notice?

Yes. If the demand arises from a 143(1) intimation, you can file a rectification request under section 154 on the Income Tax Portal. Select the assessment year, choose the rectification type (Tax Credit Mismatch for TDS issues, or Reprocess the Return for income/deduction issues), and attach supporting documents. If the demand arises from a 143(3) assessment order, you can file an appeal with CIT(Appeals) under section 246A within 30 days of receiving the order. In both cases, pay any undisputed portion of the demand immediately to stop interest accrual.

Why did I get a demand when I was expecting a refund?

This typically happens when CPC makes adjustments during processing of your return under section 143(1). Common reasons: (1) TDS mismatch — your employer or bank's TDS return shows different amounts than your ITR, (2) Deductions disallowed — 80C, 80D, or HRA exceeded limits or lacked supporting data in Form 16, (3) Income additions from AIS — bank interest, capital gains, or other income reported by third parties but not declared in your ITR, (4) Interest under sections 234A/B/C added for late filing or advance tax shortfall. Use our free 143(1) Intimation Decoder to understand the specific adjustment in your case.

How do I verify if an income tax demand notice is genuine?

Every legitimate income tax notice carries a Document Identification Number (DIN) printed on the first page. You can verify the DIN on the Income Tax Portal under e-File → Verify Notice/Order. Enter the DIN and the portal will confirm whether the notice was genuinely issued by the department. Additionally, all legitimate notices and demands will appear in your account on the Income Tax Portal under Pending Actions → Response to Outstanding Demand. If a notice does not appear on the portal, it may be fraudulent.

What documents do I need to respond to an income tax demand?

Keep and organise these documents: (1) The demand notice or 143(1) intimation PDF itself, (2) Your filed ITR (XML or acknowledgement PDF), (3) Form 16 from your employer, (4) All TDS certificates (Form 16A) from banks and other deductors, (5) Form 26AS and AIS downloaded for the relevant year, (6) Investment proofs for deductions claimed (80C, 80D, etc.), (7) Rent receipts and landlord PAN if you claimed HRA, (8) Challan receipts for advance tax and self-assessment tax payments, (9) Bank statements showing interest income. Under the Income Tax Act, retain these for a minimum of 7 years from the end of the relevant assessment year.

Income Tax / Demand Notice / Section 156

Got an income tax demand notice? Here's what it means and what to do.

Q: How do I pay an income tax demand online?

To pay a demand online: (1) Log in to the Income Tax Portal, (2) Go to e-Pay Tax → New Payment, (3) Select challan type — for demand payment use 'Income Tax (Other than Companies)' under the relevant head (400 for regular assessment tax), (4) Enter the assessment year matching the demand, (5) Pay via net banking, debit card, or UPI. After payment, the challan will be credited to your PAN. You can then respond to the outstanding demand on the portal to confirm payment.

A step-by-step guide to understanding why the Income Tax Department raised a demand, what documents you need, and how to respond — whether you agree, want to file rectification, or need to appeal.

Don't panic

Most demand notices come from 143(1) intimations — automated processing by CPC, not scrutiny. Common causes are TDS mismatches, disallowed deductions, or income additions from AIS. These are usually fixable through online rectification without needing a CA.

Types of income tax demand notices

Not all demand notices are the same. The section number on your notice tells you where it came from:

Section	What it is	How it happens
143(1) Most common	Intimation after automated processing of your ITR by CPC	CPC compares your return against 26AS, AIS, and Form 16. Any mismatch creates a demand or reduces your refund.
156	Formal notice of demand	Issued after any assessment order — 143(1), 143(3), or 147 — that results in tax payable. Gives you 30 days to pay.
245	Adjustment of refund against outstanding demand	The department sets off your pending refund from another year against an existing demand. You receive intimation before adjustment.
143(3)	Assessment order after scrutiny	An Assessing Officer reviewed your return, requested documents, and issued an order. Less than 1% of returns reach this stage.
147 / 148	Reassessment — income escaped assessment	The department believes income was not assessed in the original return. Can go back 3-10 years (16 years for foreign assets under the Black Money Act).

Top 5 reasons for a demand

1. TDS mismatch

Your ITR claims more TDS than what's in Form 26AS. Usually caused by the deductor filing the TDS return with the wrong PAN, a quarterly return not yet processed, or TDS from a previous employer missing. Fix: get the deductor to file a correction return, then file rectification.

2. Deductions disallowed (80C, 80D, HRA)

CPC capped your 80C at Rs 1.5 lakh, reduced 80D, or denied HRA because the employer didn't report it in Form 16 Part B or you didn't furnish landlord PAN for rent above Rs 1 lakh/year. Fix: gather investment proofs and rent receipts, file rectification.

3. Income added from AIS

Banks reported interest, mutual funds reported redemptions, or a buyer reported a property transaction — and that income wasn't in your ITR. CPC added it. Fix: check your AIS on the portal. If the entry is wrong, file AIS correction with the reporting entity first.

4. Advance tax / self-assessment tax not credited

Your challan payment didn't match — wrong PAN, wrong assessment year, or the bank hasn't uploaded it to OLTAS. Fix: check challan status at OLTAS, then file rectification under "Tax Credit Mismatch".

5. Interest under 234A / 234B / 234C

Mandatory interest for late filing (234A), advance tax shortfall (234B), or quarterly installment default (234C). These are automatic — CPC computes them based on dates and amounts. Fix: usually correct and must be paid. Verify the computation against your own calculation.

What to do — step by step

Open and read the intimation
Download from the Income Tax Portal or your email. PDF password is your PAN (lowercase) + date of birth (DDMMYYYY). Compare each line against your filed ITR.
Check Form 26AS and AIS
Log in to the Income Tax Portal → e-File → Income Tax Returns → view 26AS and AIS for the relevant year. Identify which specific item is mismatched.
Decode the adjustment
Use our free 143(1) Intimation Decoder to understand exactly what CPC changed, why, and what documents you need to respond.
Decide: agree, rectify, or appeal
Agree if CPC is right — pay the demand online via e-Pay Tax on the portal. Rectify if CPC is wrong — file rectification under section 154 on the portal. Appeal if the demand is large (above Rs 1 lakh) and rectification won't resolve it — file with CIT(Appeals) under section 246A within 30 days.
Respond on the portal
Go to Pending Actions → Response to Outstanding Demand. Select agree, partially agree, or disagree. Attach supporting documents if disagreeing. Submit.
Keep everything
Save the intimation, your ITR, Form 16, TDS certificates, investment proofs, and AIS. You need these for rectification, appeal, or if the assessment is reopened later. Retention period: minimum 7 years.

Decode your specific adjustment

Our free 143(1) Intimation Decoder analyses the specific adjustment in your case — TDS mismatch, 80C disallowed, HRA denied, AIS income additions, or interest charges. It tells you exactly which documents you need and whether to accept, file rectification, or appeal.

Decode my intimation →

Documents you need

Gather these before responding to any demand notice:

The demand notice or 143(1) intimation PDF
Your filed ITR (XML or acknowledgement PDF)
Form 16 from your employer
All TDS certificates — Form 16A from banks and other deductors
Form 26AS and AIS downloaded for the relevant year
Investment proofs for 80C (LIC, PPF, ELSS, tuition, home loan principal)
Health insurance premium receipts for 80D
Rent receipts + landlord PAN if you claimed HRA
Challan 280 receipts for advance tax and self-assessment tax
Bank statements showing interest income
Capital gains statements from brokers (if applicable)

How long to keep these: Under the Income Tax Act, retain all supporting documents for a minimum of 7 years from the end of the relevant assessment year. If reassessment proceedings are initiated, the period extends to 10 years. For foreign assets, the Black Money Act requires retention for 16 years.

Frequently Asked Questions

What is the password for my demand notice PDF?

Your PAN in lowercase followed by your date of birth in DDMMYYYY format, with no spaces. Example: PAN ABCDE1234F + DOB 15 March 1985 = abcde1234f15031985.

How do I pay an income tax demand online?

Log in to the Income Tax Portal → e-Pay Tax → New Payment → select "Income Tax (Other than Companies)" → assessment year matching your demand → pay via net banking, debit card, or UPI. After payment, go to Pending Actions → Response to Outstanding Demand and confirm that the demand has been paid.

What happens if I ignore the demand notice?

Interest under section 220(2) accrues at 1% per month on the unpaid amount. The department can adjust your pending refunds against the demand under section 245. A penalty under section 221 can be levied. In extreme cases, the Tax Recovery Officer can attach bank accounts, salary, or property. Respond promptly — even if you disagree.

How do I file rectification under section 154?

Log in to the Income Tax Portal → e-File → Rectification → select assessment year → choose rectification type: "Tax Credit Mismatch" for TDS issues, or "Reprocess the Return" for income and deduction issues. Attach supporting documents. You have 4 years from the end of the financial year in which the order was passed.

Can the department adjust my refund against an old demand?

Yes, under section 245. Before doing so, the department must send you an intimation giving you an opportunity to respond. If you believe the old demand is incorrect, respond to the intimation and file rectification for the old year before the adjustment happens.

Should I pay the demand even if I plan to file rectification?

If you partially agree, pay the undisputed portion immediately — this stops interest from accruing on that amount. For the disputed portion, file rectification. If the entire demand is wrong, you can file rectification without paying, but be aware that outstanding demands may affect your refunds from other years.

How do I verify if a demand notice is genuine?

Every legitimate notice has a Document Identification Number (DIN) on the first page. Verify it on the Income Tax Portal: e-File → Verify Notice/Order → enter the DIN. Additionally, all real demands appear under Pending Actions → Response to Outstanding Demand on the portal. If it's not there, it may be fraudulent.

When should I consult a CA instead of handling it myself?

Handle it yourself if: the demand is small (under Rs 25,000), the reason is clearly a TDS mismatch or a simple deduction disallowance, and you have the supporting documents. Consult a CA if: the demand exceeds Rs 1 lakh, the intimation involves multiple complex adjustments, you're considering filing an appeal under section 246A, or you received a 143(2) scrutiny notice rather than a 143(1) intimation.