Income Tax Notice Under Section 156

A Section 156 notice is the Income Tax Department's formal notice of demand, served when tax, interest, penalty, fine or any other sum becomes payable by you as a consequence of an order passed under the Income-tax Act. A demand notice does not start a fresh assessment or an inquiry; it arrives only after an order has already created a liability. In that sense it is the bill that follows an order: a 143(1) adjustment, a 143(3) or 144 assessment, a 147/148 reassessment, a 154 rectification, or a penalty order. The notice specifies the exact amount due, the assessment year, and the date by which you must pay. On the e-filing portal the same liability appears as an "outstanding demand", so a search for an income tax notice u/s 156 and an "outstanding demand" flagged under Pending Actions point to the same document. If an assessment order is not accompanied by a demand notice, no amount is recoverable from you.

Section 156 of the Income-tax Act, 1961 sits behind five kinds of order that typically generate a demand:

• A Section 143(1) intimation carrying an adjustment
• A Section 143(3) or 144 assessment order
• A Section 147/148 reassessment order
• A Section 154 rectification order
• A penalty order

Two features set the 156 demand apart. There is no separate statutory time limit to issue it: it follows whenever an order creates a demand, unlike issue-limited notices such as 143(2) or 148. And the PDF is password-protected, opened with your PAN in lower case followed by your date of birth as DDMMYYYY. Before you pay, authenticate the notice on the portal to confirm the demand is genuine; a Section 156 demand is only one type of income tax notice among the many the department issues.

You must pay a Section 156 demand within 30 days of the date the notice is served, under Section 220(1). The assessing officer can, with the prior approval of the Joint Commissioner and if he has reason to believe that 30 days will be detrimental to revenue, shorten this period; on your application, he may instead extend the time or allow you to pay in instalments under Section 220(3). The 30-day clock is what starts the interest and default consequences, so treat it as a hard deadline even if you intend to dispute the demand. The window runs from service of the notice, not from the date printed on the order, and filing a rectification or an appeal does not by itself pause it.

If you do not pay a Section 156 demand within the 30-day window, simple interest accrues at 1% for every month or part of a month under Section 220(2), calculated from the day after the 30-day period ends until you pay. Because it is charged on every month or part of a month, even one day into a new month counts as a full month. This Section 220(2) interest is separate from and additional to the interest under Sections 234A, 234B and 234C that may already be built into the demand. Section 220(2) is the price of delaying payment after the demand is raised, not of the original shortfall.

Take a worked example. Meena is served a Section 156 demand of ₹1,00,000 for AY 2025-26 on 1 April 2026; her 30-day window ends 1 May 2026. She pays on 20 June 2026. Interest under Section 220(2) runs from 2 May 2026: May is one month and 2–20 June is "part of a month," so 2 months × 1% × ₹1,00,000 = ₹2,000 of Section 220(2) interest, on top of the ₹1,00,000. For how this interest compounds with 234A, 234B and 234C and the wider cost of delay, see what happens if you ignore an income tax notice.

You pay a Section 156 demand through the e-Pay Tax facility on the income-tax e-filing portal (incometax.gov.in). The payment runs through the portal's own demand workflow:

1. Log in and go to Pending Actions → Response to Outstanding Demand.
2. Locate the demand for the relevant assessment year and select "Pay Now"; this routes you to e-Pay Tax.
3. Choose the correct assessment year and the head "Tax on Regular Assessment (400)" for a demand raised after assessment, not 300 – Self-Assessment.
4. After payment, submit the challan against the demand under Response to Outstanding Demand so the department marks it closed.

Paying within 30 days stops Section 220(2) interest and prevents any default or recovery action. The minor head matters: using the wrong one leaves the demand open, so you must tag the challan to the demand rather than merely paying.

You respond to a Section 156 demand on the e-filing portal under Pending Actions → Response to Outstanding Demand, where the portal gives you three responses: "Demand is correct", "Disagree with demand (either in full or in part)", or record that the demand is "already paid". If you choose Demand is correct, you accept it and pay, and you cannot later dispute it. If you Disagree in full or in part, you must select a reason from the portal's list: demand paid, demand already reduced by rectification or appeal, rectification or revision application filed, appeal filed with a stay petition, instalment requested, or the demand is not correct. Behind each portal reason sits a statutory route: a genuine mistake is a Section 154 rectification, a dispute on merits is an appeal under Section 246A filed in Form 35 within 30 days, and a request to hold recovery is a stay under Section 220(6). Choosing Disagree on the portal does not by itself stop recovery, so if you dispute on merits you must also file the appeal and apply for the stay. For the full portal walkthrough and Form 35 filing, respond to an income tax notice on the e-Filing portal.

If the portal shows an outstanding demand you have already paid, respond on the e-filing portal under Pending Actions → Response to Outstanding Demand and select "Demand is correct" followed by "Yes, I have already paid", then enter the challan details: BSR code, challan serial number (CIN), date of payment and amount. A demand most often keeps showing as outstanding for one of three reasons: the challan was never tagged to it, it was paid under the wrong head (300 – Self-Assessment instead of 400 – Tax on Regular Assessment), or the payment has not yet reflected in the department's system. Adding the correct challan against the demand tells the system the demand is satisfied; once it matches, the outstanding demand is cleared. Do this even after paying, because an untagged paid demand can still trigger Section 220(2) interest flags and recovery action until it is matched.

The steps are short:

1. Under Pending Actions → Response to Outstanding Demand, select "Demand is correct" then "Yes, I have already paid".
2. Enter the challan details: BSR code, CIN, date and amount.
3. Submit the challan against the demand so the payment is matched.

Why it still shows outstanding: (1) the challan was not tagged; (2) it was paid under the wrong minor head; (3) the payment has not yet reflected. If it was paid under the wrong head, the challan may need a challan correction request before it can be tagged, and a matched payment can take a few days to reflect.

You are treated as an "assessee in default" under Section 220(4) the moment you fail to pay a Section 156 demand within the 30-day window (or any extended time the assessing officer allowed). Being in default is the trigger that unlocks coercive action. The assessing officer may impose a penalty under Section 221 of an amount he directs, not exceeding the tax arrears, in addition to the Section 220(2) interest that is already running. The department can then move to recovery under Sections 222 and 226. If you have applied for and been granted a stay under Section 220(6), you are treated as not in default for the stayed amount while the appeal is pending.

The chain is straightforward: miss 30 days → assessee in default (Section 220(4)) → penalty (Section 221) plus interest (Section 220(2)) → recovery (Section 222 / Section 226(3)). The Section 221 penalty is capped at the arrears and can be levied only after you are given a reasonable opportunity of being heard.

Once you are in default on a Section 156 demand, the department can recover the arrears without going to court. Under Section 226(3) it can issue a garnishee notice (a written notice to any person holding money for you, most commonly your bank, but also an employer or a debtor) requiring them to pay that money directly to the department. Under Section 222, the Tax Recovery Officer can draw up a certificate of arrears and recover by attaching and selling your movable and immovable property, or appointing a receiver to manage your assets, following the Second Schedule to the Act. These are the concrete consequences behind the phrase "bank account attachment" that generic guides mention.

Under Section 222 and the Second Schedule, the Tax Recovery Officer has three recovery modes:

• Attachment and sale of your movable property
• Attachment and sale of your immovable property
• Appointment of a receiver to manage your assets

Recovery can begin as soon as you are in default and no stay is in force, which is what a notice u/s 226(3) means in practice.

Yes. Under Section 245, the department can set off a refund due to you for one year against an outstanding Section 156 demand from another year, but only after serving you a prior intimation and giving you 30 days to respond. This is a common way a demand is reduced or cleared without a fresh payment: if you have a refund pending, an old demand may be recovered by adjustment rather than by garnishee or attachment. The assessment year of the refund and of the demand can differ. Because the Section 245 adjustment has its own 30-day response window and its own rules, the full process is covered on the Section 245 refund adjustment page.