You filed your FY 2025-26 return cleanly. You tracked your Schedule VDA entries, your TDS credits matched, and you were expecting a refund. Then an intimation arrived from the Income Tax Department (ITD), and your refund was adjusted against an old tax demand.
For most crypto traders receiving this notice right now, the tax demand behind it traces back to FY 2021-22, the first year VDA income was formally assessed under Schedule VDA. The ITD spent the years since cross-referencing AIS exchange data with the declared gains for that year. Where mismatches were found and tax demands were not resolved, those dues remained pending in the system, continued to attract interest, and were later adjusted against future tax refunds.
The intimation that you received is a Section 245 notice. It is not a penalty, and it does not mean your current return is wrong. It means the ITD is collecting a debt it says you already owe, using your refund as the mechanism. Here, you have 30 days to respond. This guide walks you through exactly what happened, whether the demand is likely correct, and what to do before that window closes.
Key Takeaways
- A Section 245 notice is an intimation, not a penalty, it informs you that the ITD intends to offset your refund against an outstanding demand before paying it out.
- The demand can relate to any previous assessment year, there is no time bar on how old it can be.
- FY 2021-22 crypto assessments are now the most common source of outstanding VDA demands, triggering Section 245 notices in FY 2025-26 returns.
- You have 30 days from the date of receipt to respond, no response means automatic adjustment, including any interest accrued on the original demand.
- You can agree, partially disagree, or fully disagree with the demand, each option has a different procedural outcome.
- If the outstanding demand exceeds your current refund, the entire refund is consumed, and the balance demand remains live.
- A demand you previously disputed via a Section 154 rectification may still be alive if the ITD rejected your rectification at the time, even if you heard nothing further.
- Unresolved demands do not expire, they accumulate interest and can resurface in any future year where a refund is due.
- Asset attachment and recovery proceedings are a realistic consequence of prolonged non-response, not a remote threat.
How to Verify an Income Tax Notice Online Using DIN?
Learning that a DIN exists is one thing. But knowing where and how to check it is what actually protects you. The ITD provides a dedicated authentication tool on its e-filing portal, and it does not require you to log in. Anyone, registered or not, can use it.
Where Do You Go to Verify a Notice?
Visit incometax.gov.in. On the homepage, locate and click “Authenticate Notice / Order Issued by ITD.” The tool opens immediately without requiring any login. You will be offered two methods of verification, choosing the one that best matches the information available on your notice.
Method 1: Verify Using PAN and Notice Details
This method works when you have the notice in hand but want to cross-check using your own PAN details rather than the DIN alone:
- Select PAN, Document Type, Assessment Year, Date of Issue, and enter your mobile number
- Click Continue
- Enter the 6-digit OTP sent to the mobile number you provided
- The OTP is valid for 15 minutes. You have 3 attempts to enter it correctly
- If the notice is genuine, the document number and date of issue will appear on screen
- If nothing is found, the portal displays: “No record found for the given criteria”
What Is a Section 245 Notice?
A Section 245 notice, formally an intimation under Section 245 of the Income Tax Act, 1961, is the ITD’s written communication that it is about to set off your pending refund against an outstanding tax demand from a prior assessment year.
It sits under Chapter XIX of the Income Tax Act, which governs refunds. The law requires the ITD to notify you in writing and give you an opportunity to respond before making the adjustment. That notification is the Section 245 intimation you received.
It is important to understand what this notice is not. It is not a scrutiny notice. It is not a fresh assessment of your FY 2025-26 return. Your current-year filing is not in question. The ITD is simply collecting a debt it says you already owe, using your refund as the collection mechanism.
Why Are Crypto Traders Receiving This Notice Now?
Most crypto traders receiving a Section 245 notice in 2026 are dealing with demands rooted in FY 2021-22. Here is why that year specifically keeps surfacing.
FY 2021-22 Assessments Have Now Completed the Review Cycle
FY 2021-22 was the first year the ITD formally assessed VDA income under Schedule VDA. Assessment orders from that year took time to process, verify, and finalise. By FY 2025-26, most of those assessments have completed their review cycle, and the demands raised from them are now active and eligible for refund adjustment under Section 245.
Unresolved Demands From That Year Have Been Accumulating Interest Since
A demand raised in FY 2021-22 does not expire. It continues accumulating interest every year it remains unpaid or undisputed. Many traders received those original demand notices, assumed they would expire, and took no action. Three years later, that balance, principal plus compounded interest, is now sitting in the ITD’s offset queue against your FY 2025-26 refund.
Section 154 Rectifications Filed Then Are Now Confirmed as Rejected
Traders who disputed their FY 2021-22 demands via a Section 154 rectification often heard nothing further and assumed the matter was resolved. In many cases, the ITD rejected the rectification silently. The original demand stayed alive throughout. The Section 245 intimation arriving now is frequently the first confirmation a trader receives that their rectification was never accepted.
AIS Reporting From 2021-22 Has Been Reconciled, and Gaps Have Been Identified
The ITD’s AIS system has matured significantly since 2021-22. Exchange SFT reporting has been standardised, historical transaction data has been reconciled, and gaps between declared Schedule VDA gains and AIS gross volumes from that year have been formally identified. Where those gaps generated demands that were not settled, the ITD is now acting on them through Section 245 adjustments.
How Does a Section 245 Notice Interact With Crypto VDA Income Specifically?
FY 2021-22 sits at a unique intersection. The 30% flat tax under Section 115BBH applied from AY 2022-23. The Schedule VDA was new. Many traders were unaware of the full implications, or were advised incorrectly by professionals unfamiliar with the new framework.
The ITD cross-referenced AIS exchange data against declared Schedule VDA income for that year and raised demands where discrepancies existed. Those demands are now three years old, with three years of interest, and are the most common source of Section 245 intimations received by crypto traders in FY 2025-26.
For a full picture of how the ITD tracks crypto transactions and builds its enforcement data, see how the Income Tax Department tracks crypto trades.
Schedule VDA Mismatch: The Specific Mechanism
The ITD’s AIS records gross transaction volume reported by exchanges under Section 194S SFT data. Your Schedule VDA declaration reflects net gains. The two figures are structurally different, and where a trader did not correctly reconcile them in their FY 2021-22 return, the ITD generated a demand based on the AIS figure.
If your Section 245 notice relates to this type of mismatch, your disagreement response should include a full reconciliation showing gross volume versus cost of acquisition and net taxable gain, supported by exchange statements for that year.
P2P TDS Demands Pre-2023
Before the Section 194S compliance framework was well-established on foreign platforms, many P2P traders on Binance and similar platforms conducted trades without deducting TDS. Demands for unpaid TDS under Section 194S, plus interest, from those years can also surface through a Section 245 intimation.
The penalty under Section 271C for non-deduction of TDS equals 100% of the unpaid TDS amount. If that penalty was levied and not paid, it now forms part of the outstanding demand and is being offset against your refund.
For the full context on P2P enforcement, see why P2P crypto trades are getting taxed heavily in India.
How to Respond to a Section 245 Notice?
Responding correctly within the deadline is the single most important action you can take. Here is exactly what to do, in the order you should do it.
Before you submit any response, gather these documents:
- The Section 245 intimation itself, note the demand amount, the assessment year it relates to, and the response deadline
- Your ITR and acknowledgement for the year the demand relates to
- Form 26AS and AIS for that assessment year
- Any TDS certificates, challan receipts, or payment confirmations for that year
- Any prior rectification application filed under Section 154, and any response received
- Your Schedule VDA transaction records for that year, if the demand relates to VDA income
Step 1: Verify the Notice, if it is Authentic
Log in to the Income Tax e-filing portal and verify the Document Identification Number (DIN) on the intimation. Every authentic ITD communication carries a DIN. Do not take any action on an intimation that cannot be verified on the portal.
Step 2: Locate the Outstanding Demand Details
Navigate to “Pending Actions” and then click on “Response to Outstanding Demand”. The portal will display the outstanding demand, the assessment year it relates to, the principal amount, and the interest accrued to date. Note the exact figures before proceeding.
Step 3: Review the Demand Against Your Own Records
Cross-check the demand against your ITR, Form 26AS, and AIS for the relevant assessment year. Identify whether the demand arose from an underpayment, a TDS credit mismatch, an AIS discrepancy, or an unadjusted VDA assessment.
If the demand relates to FY 2021-22 crypto income, pull your Schedule VDA entries and exchange statements for that year. Determine whether the demand figure is arithmetically correct, given what you actually declared and paid.
Step 4: Submit Your Response
Click Submit Response on the outstanding demand screen. Two options are available:
- If the demand is correct: Select “Demand is Correct” and submit. If a refund is due, the outstanding amount plus accrued interest will be adjusted against it automatically. If no refund exists, pay the demand directly through the portal.
- If you disagree: fully or partially: Select “Disagree with Demand (Either in Full or Part)” and add your reasons. Accepted reasons include: demand already paid, demand reduced by rectification or revision, appeal already filed, and others. Select every reason that applies and provide supporting details for each.
After submitting your disagreement, the ITD reviews your reasons and decides whether to accept them. Keep a record of your submission and follow up if no response is received within 30 days.
Step 5: Confirm and Save Your Submission
After submitting, verify that the portal has recorded your response. Save or screenshot the acknowledgement. This confirmation is your evidence that you responded within the deadline, keep it with your tax records for that assessment year.
What Happens If You Do Not Respond in 30 Days?
Missing the 30-day response window is not a passive outcome, it sets a specific chain of consequences in motion. Here is what each one means for your refund and future returns.
Automatic Refund Adjustment, Including Interest
If no response is submitted within 30 days, the ITD proceeds with the adjustment automatically. The full refund, or as much of it as covers the demand, is applied against the outstanding balance.
Critically, the interest that has accrued on the principal demand since the original assessment year is also adjusted. You do not get to separate the interest from the principal, both are deducted from your refund simultaneously.
The Balance Demand Does Not Disappear
Where the outstanding demand is larger than your current refund, the refund is consumed entirely, and the remaining demand balance stays live. It will appear against your name in future years and can be offset against any subsequent refunds.
There is no ceiling on how many future refunds can be consumed this way. Each year you expect a refund becomes a year the ITD can collect against an old balance.
Recovery Proceedings and Asset Attachment
Continued non-response, across multiple intimations over multiple years, can escalate to active recovery proceedings. Under the Income Tax Act, the ITD has the authority to attach bank accounts, immovable property, and other assets to recover outstanding demands.
For most crypto traders receiving a first Section 245 intimation, this level of escalation is not immediate. It becomes a realistic risk only when a demand is repeatedly ignored across several assessment years without any response or dispute being placed on record.
Rebuilding three-year-old exchange records under a 30-day deadline is where most traders run into trouble. KoinX reconstructs your historical FY 2021-22 transaction data, generates the Schedule VDA reconciliation, and surfaces the AIS mismatch gap, so you walk into your response with documentation, not guesswork.
How KoinX Can Help With a Section 245 Notice?
When a Section 245 notice arrives citing a FY 2021-22 VDA demand, the first thing you need is evidence, accurate transaction records, a reconciled Schedule VDA computation, and TDS credit documentation for that year.
Rebuilding three-year-old crypto records manually, across multiple exchanges, is where most traders struggle. KoinX is a global crypto tax platform trusted by over 1.5 million users across 100+ countries, with 800+ exchange and wallet integrations, built specifically to produce the documentation you need to dispute or confirm a demand with precision.
Historical Transaction Reconstruction
KoinX imports transaction data from 800+ exchanges and wallets, including historical data for FY 2021-22. For traders who no longer have their original exchange statements or CSV exports from that year, KoinX can reconstruct the full transaction history by connecting directly to the exchange via API or by processing uploaded statements. The output is a complete, dated transaction log with INR FMV values at each receipt and disposal date.
Schedule VDA Reconciliation Report
KoinX generates an ITR-ready Schedule VDA report for any assessment year, not just the current one. For a Section 245 dispute involving a FY 2021-22 demand, you can generate the Schedule VDA computation for that year, compare it against the AIS figure the ITD used to raise the demand, and produce a reconciliation document showing exactly where the discrepancy arose and why the net taxable gain is what you had declared.
AIS Mismatch Detection
KoinX’s AIS mismatch detection tool compares your declared Schedule VDA figures against the gross volume data reflected in your AIS. Where a discrepancy exists, of the kind that generated the FY 2021-22 demand in the first place, KoinX identifies it and calculates the reconciliation gap. This is the exact document you need when submitting a disagreement response on the portal.
In-App Access to Crypto Tax Experts
If the demand is complex, involving multiple assessment years, a rejected Section 154 rectification, or a penalty component, KoinX connects you directly with an India-based crypto tax expert through the platform. The expert reviews your records, advises on whether to agree or dispute, and helps you prepare the response documentation. This is available without hiring an external CA.
If you have received a Section 245 notice involving a crypto demand, get started with KoinX today and reconstruct the records you need to respond accurately, before the 30-day window closes.
Conclusion
A Section 245 notice is not a crisis, but it is a deadline. Whether the demand is correct or not, your only window to challenge it is 30 days. Miss it, and the adjustment is automatic, the interest is included, and any remaining balance follows you into every future refund year until it is fully cleared.
What this notice really signals is that a gap from FY 2021-22 was never properly closed. Responding to this intimation resolves the immediate offset, but the underlying records from that year need to be accurate and reconciled before you face the next one.
That reconciliation starts with the transaction data. KoinX reconstructs your historical exchange records and generates the Schedule VDA computation for FY 2021-22. So, sign up on KoinX today and surface the exact AIS mismatch gap, so your response is built on documentation, not memory.
Frequently Asked Questions
What Happens If the Demand Is Larger Than My Refund?
Your entire refund is consumed and applied against the demand. The remaining balance stays outstanding in the ITD’s system. It will be reflected in your Form 26AS and AIS, and it can be offset against any future refund in subsequent years. Interest continues to accrue on the outstanding balance until it is fully paid or successfully disputed.
Can I Dispute a Section 245 Notice If I Have Already Paid Part of the Demand?
Yes. Select “Disagree with Demand (Either in Full or Part)” and choose “Demand already paid” as your reason. Provide the challan number, payment date, and amount paid as supporting documentation. If only part of the demand was paid, dispute only the paid portion and let the remaining outstanding balance proceed to adjustment, or pay it directly through the portal.
I Did Not Respond Within 30 Days. What Do I Do Now?
The adjustment will have been processed automatically. Log in to the portal to confirm the current status of the demand. If you believe the demand was incorrect, you still have options. You can file a revised return under Section 139(5) if the assessment year is still open, or approach the Assessing Officer with a rectification application under Section 154 if new information or a computational error supports your case. Consult a CA before proceeding.
I Am Expecting a Refund This Year and Have Old Crypto Trades. Should I Be Worried?
If you traded crypto in FY 2021-22 and received a demand notice at the time that you did not pay or formally dispute, there is a meaningful probability that a Section 245 intimation will arrive this year. Log in to the income tax portal now and check for any outstanding demands under Pending Actions before your FY 2025-26 refund is processed. Early visibility gives you time to prepare documentation before the 30-day window starts.
Can the ITD Attach My Assets If I Ignore Multiple Section 245 Notices?
Yes. If a demand remains unpaid and undisputed across multiple assessment years, the ITD has statutory authority to initiate recovery proceedings, including bank account attachment and immovable property attachment. For a first-time Section 245 intimation, this level of escalation is not immediate; it becomes a realistic risk only after sustained non-response. Responding within 30 days, even to dispute the demand, is always the correct course of action.
I Filed FY 2021-22 Correctly. Why Am I Still Getting This Notice?
The demand may relate to an AIS mismatch that the ITD identified between your declared Schedule VDA gain and the gross exchange volume it received through SFT reporting. Even if your net gain calculation was correct, the ITD may have raised a demand based on the gross figure. Log in to the portal, identify the demand amount and the assessment year it relates to, and cross-check it against your original Schedule VDA computation and exchange records for that year.
