Section 245 → Section 281
Set off of refunds against tax remaining payable
Quick Answer
Section 245 of the Income Tax Act, 1961 (Set off of refunds against tax remaining payable) corresponds to Section 281 of the Income-tax Act, 2025, effective 1st April 2026. Status: Retained.
What changed for Section 245
Under the Income Tax Act, 1961, Section 245 governs set off of refunds against tax remaining payable. Allows the department to adjust a refund due to the taxpayer against any old outstanding tax demand.
From 1st April 2026, the same subject sits at Section 281 of the Income-tax Act, 2025 — retained and renumbered as Section 281 of the Income-tax Act, 2025. Retained. A prior intimation notice (under Section 245) is sent to the taxpayer, giving them 30 days to respond/object before adjustment.
For Section 245, the practical impact is rated High. Major hurdle in getting cash refunds if old disputes exist.
Sec 245
Provision Summary
Allows the department to adjust a refund due to the taxpayer against any old outstanding tax demand.
Sec 281
Provision Summary
Retained. A prior intimation notice (under Section 245) is sent to the taxpayer, giving them 30 days to respond/object before adjustment.
Key Changes & Highlights
- Adjustment process is now fully automated via CPC and visible on the 'Response to Outstanding Demand' portal.
Frequently Asked Questions
What is Section 245 of the Income Tax Act, 1961 about?
Section 245 of the Income Tax Act, 1961 covers set off of refunds against tax remaining payable. Allows the department to adjust a refund due to the taxpayer against any old outstanding tax demand.
Which section replaces Section 245 in the Income-tax Act, 2025?
Section 245 of the Income Tax Act, 1961 maps to Section 281 of the Income-tax Act, 2025, effective 1st April 2026 (status: Retained). Retained. A prior intimation notice (under Section 245) is sent to the taxpayer, giving them 30 days to respond/object before adjustment.
What is the impact of the change to Section 245 under the new tax code?
The transition impact for Section 245 is rated High. Major hurdle in getting cash refunds if old disputes exist.
What should I watch out for when Section 245 moves to the 2025 code?
Adjustment process is now fully automated via CPC and visible on the 'Response to Outstanding Demand' portal. These points are specific to Section 245 (Set off of refunds against tax remaining payable).
Disclaimer: This mapping of Section 245 (Set off of refunds against tax remaining payable) to Section 281 of the Income-tax Act, 2025 is for educational and reference purposes only, based on publicly available drafts and circulars. As Section 245 is currently marked Retained, always confirm its treatment with a qualified Chartered Accountant before filing or making compliance decisions.
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