Sometimes taxpayers pay tax under one head (for example Self Assessment Tax) instead of Advance Tax or Regular Assessment Tax. Because of this mismatch, the Income Tax Department raises a demand even though tax was already paid.

This article explains how to adjust the demand by responding correctly on the Income Tax Portal.

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Common Situation

Example:

• Tax was payable as Self Assessment Tax (Minor Head 300)
• But payment was made under Advance Tax (Minor Head 100)
• While processing return under section 143(1), system does not match properly
• Demand is generated

This does not mean tax is unpaid. It is only a head mismatch issue.

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Legal Reference

Demand is generally raised during processing under
Income-tax Act, 1961
especially under Section 143(1).

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Step-by-Step Process to Set Off Demand Using Challan

Follow these steps on the Income Tax Portal:

Step 1: Login to Income Tax Portal

Visit the official portal of
Income Tax Department

Login using PAN and password.

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Step 2: Go to Pending Actions

• Click on Pending Actions
• Select Response to Outstanding Demand

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Step 3: Select the Relevant Demand

• Click on the Assessment Year
• Choose “Submit Response”

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Step 4: Select Response Type

Choose:

👉 Demand is correct but already paid

OR

👉 Disagree with demand (if head mismatch)

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Step 5: Add Challan Details

Enter:

• BSR Code
• Date of Payment
• Challan Serial Number
• Amount
• Minor Head under which paid

System will validate challan from OLTAS database.

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Step 6: Submit Response

After verification, submit using EVC or Aadhaar OTP.

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Important Practical Points

1. If tax is paid under wrong minor head, usually demand can be adjusted directly.
2. If challan not reflecting properly, file Challan Correction Request through bank within time limit.
3. If adjustment is not accepted, file Rectification under Section 154.

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When Rectification is Required

If CPC does not automatically allow adjustment:

• Go to Services
• Select Rectification
• Choose “Tax credit mismatch”
• Mention correct challan details

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Example Scenario

Tax payable: 50,000
Paid under Advance Tax instead of Self Assessment
CPC raised demand of 50,000

Solution: Submit demand response and mention challan → demand gets nullified.

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Conclusion

Demand due to wrong head payment is a technical mismatch, not actual non-payment. Proper response on Income Tax portal with correct challan details will resolve the issue.

Professionals must carefully verify minor head before payment to avoid such demands.