Section 156 of the Income-tax Act – Notice of Demand FAQs

Notice of Demand Section 156 of the Income-tax Act – FAQs

Section 156 of the Income-tax Act, 1961 empowers the Income Tax Department to issue a Notice of Demand where any tax, interest, penalty, fee, or other sum is payable by a taxpayer as a consequence of any order passed under the Act. The notice specifies the amount payable and the time within which payment must be made, failing which recovery proceedings may be initiated.

In practice, notices under section 156 commonly arise after intimation under section 143(1), completion of assessment, rectification orders, or adjustments of refund. This FAQ page explains the legal basis, contents, time limits, taxpayer rights, remedies, and consequences relating to a Notice of Demand under section 156, based on the Income-tax Act and prevailing departmental practice.

FAQs on income tax Notice of Demand and time limit for payment under Section 156

FAQs– Notice of Demand under Section 156

A Notice of Demand under section 156 is a formal communication issued by the Income Tax Department requiring a taxpayer to pay any sum payable under the Act, such as tax, interest, penalty, or fee, arising from an order passed under the Income-tax Act.

A notice under section 156 is issued after the passing of an order that results in a payable amount, such as an intimation under section 143(1), an assessment order, a rectification order under section 154, or any other order creating a tax demand.

The notice specifies the assessment year, reference to the order giving rise to the demand, the amount payable (including tax, interest, penalty or fee), and the time limit within which payment is required to be made.

Unless otherwise specified, the amount mentioned in a Notice of Demand must be paid within 30 days from the date of service of the notice. In certain cases, the Assessing Officer may require payment in a shorter period with reasons recorded in writing.

No. A Notice of Demand is not an assessment order. It is a consequential notice issued to recover amounts payable pursuant to an order passed under the Act.

Yes. If the taxpayer believes that the demand is incorrect, disputed, already paid, or under rectification or appeal, an appropriate response must be filed through the Income Tax e-filing portal.

Depending on the facts, the taxpayer may file a rectification application under section 154, prefer an appeal against the underlying order, seek correction of tax credit mismatch, or apply for stay of demand under applicable provisions.

Yes. If the demand is not paid within the prescribed time and no stay is in force, the department may initiate recovery proceedings, including adjustment of refund, attachment of bank accounts, or other modes permitted under the Act.

Yes. Interest may continue to accrue on unpaid demand in accordance with applicable provisions of the Income-tax Act until the demand is discharged or stayed.

Yes. Where the demand is disputed and an appeal or rectification has been filed, the taxpayer may apply for stay of demand, subject to conditions prescribed by law and administrative instructions.

Outstanding demands can be viewed by logging into the Income Tax e-filing portal under the “Outstanding Demand” section of the taxpayer’s account.

Payment of demand discharges the immediate liability. However, it does not prevent the taxpayer from pursuing appeal, rectification, or refund claim if the demand is subsequently found to be incorrect.

Key Takeaway

A Notice of Demand under section 156 is a statutory recovery mechanism that flows automatically from orders passed under the Income-tax Act. It does not create liability by itself but merely communicates the amount payable pursuant to an underlying order. Understanding the origin of the demand is therefore critical before taking any action.

Many demands arise due to processing adjustments, credit mismatches, or rectifiable errors, and can be resolved through timely rectification or appeal. Ignoring a notice under section 156 can lead to recovery proceedings and interest accumulation, whereas prompt verification and appropriate response can prevent unnecessary financial and procedural hardship. Taxpayers should treat every Notice of Demand as actionable and ensure it is either paid, stayed, or legally challenged within the prescribed framework.

Income tax demand notice under Section 156 showing recovery and compliance process
FAQs explaining Notice of Demand under Section 156, payment timelines, remedies and recovery under the Income-tax Act

Next steps

Key official sources

Disclaimer

This FAQ is for informational purposes only and does not constitute legal or professional advice. Tax positions should be evaluated based on individual facts and applicable law.