Notice of Demand and Intimation of Loss under the Income Tax Act 2025 (Sections 289 to 291)

A notice of demand is the written notice the Assessing Officer serves when tax, interest, penalty, fine or any other sum becomes payable because of an order under the Income-tax Act, 2025. It is governed by section 289, and the prescribed form is Form No. 103 (rule 179(1)). A related intimation of loss under section 291 is the written order that tells you the loss the officer has computed and that you may carry forward.

This guide covers the three sections together: section 289 (the demand), section 290 (modifying a demand after an insolvency order) and section 291 (loss intimation). All provisions are quoted from the Act as amended by the Finance Act, 2026, with the Income-tax Rules, 2026 for forms. Last reviewed against that text on 10 November 2026. It is information, not advice on any specific notice.

What is a notice of demand under section 289?

Section 289(1) says that when any tax, interest, penalty, fine or any other sum is payable in consequence of an order passed under the Act, the Assessing Officer shall serve a notice of demand on the assessee, in the prescribed form, specifying the sum payable.

Two points follow from the wording. First, the trigger is an order: an assessment order, a penalty order and so on. Second, the notice must state the amount. A demand that does not say what is payable does not meet section 289(1).

Which form is used for a notice of demand?

Situation	Form	Where
Normal notice of demand under section 289	Form No. 103	Rule 179(1)
Notice of demand following an order under section 407 (advance tax payable on the Assessing Officer's order)	Form No. 151	Rule 179(2); rule 222

Section 407 lets the Assessing Officer, for a person already regularly assessed, order payment of advance tax in instalments. Section 407(2) says that order is to be followed by a notice of demand under section 289, and rules 179(2) and 222 fix Form No. 151 for it.

Is a processing intimation also a notice of demand?

Yes, in two cases. Section 289(2) says that where a sum is determined to be payable by the assessee, the deductor or the collector under section 270 or section 399, the intimation under those sections is deemed to be a notice of demand.

• Section 270 deals with processing of a return. The intimation specifies the sum payable or the refund due. Section 270(4) bars sending it after nine months from the end of the financial year in which the return is made.
• Section 399 deals with processing of TDS and TCS statements. The intimation goes to the deductor or collector, and section 399(2) says it must be sent within one year from the end of the tax year in which the statement is filed.

So a return processed with tax still to pay, or a TDS statement processed with a short-deduction amount payable, creates a demand without a separate assessment order.

What is the special rule for start-up employee shares in section 289(3)?

Section 289(3) is a deferral rule for employees of an eligible start-up (referred to in section 140). It applies where the employee's income includes the value of specified security or sweat equity shares taxable under section 17(1)(d), allotted or transferred directly or indirectly by the current employer. The tax or interest on that income, included in the notice of demand, is payable within fourteen days of the earliest of:

1. the expiry of sixty months from the end of the relevant tax year;
2. the date the employee sells the shares; or
3. the date the employee ceases to be an employee of the employer who allotted or transferred the shares.

What happens when an insolvency order reduces a demand (section 290)?

Section 290(1) applies when a notice of demand has already been issued under section 289 and the sum is reduced as a result of an order of the Adjudicating Authority as defined in section 5(1) of the Insolvency and Bankruptcy Code, 2016. The Assessing Officer must then serve a modified notice of demand specifying the sum payable, if any. That modified notice is treated as a notice under section 289.

Section 290(2) adds that the modified notice must be revised if the Adjudicating Authority's order is later modified by the National Company Law Appellate Tribunal or the Supreme Court.

What is an intimation of loss under section 291?

Section 291 requires the Assessing Officer to notify the assessee, by an order in writing, of the amount of loss computed by him for the purposes of section 111(1), 112, 113(2) or 115(1). Two conditions must both hold:

• in the course of assessing the total income, it is established that a loss has taken place; and
• the assessee is entitled to have the loss carried forward and set off under those sections.

Section	Loss covered	Carry-forward cap (tax years immediately succeeding the loss year)
111	Capital gains loss (short-term set off only against capital gains; long-term only against long-term gains)	Eight (section 111(2))
112	Business loss, other than speculation	Eight (section 112(2))
113	Speculation business loss	Four (section 113(3))
115	Loss from the specified activity of owning and maintaining race horses	Four (section 115(3))

Why it matters: the intimation is the officer's recorded figure for the loss you are entitled to carry forward. Compare it with the loss in your own computation. If the two differ, the difference is where a rectification request or an appeal would start. Whether a loss can be carried forward at all also depends on filing the return on time; see our guide on filing the return to carry forward losses.

How long do I have to pay a notice of demand, and what if I do not?

Section 411(1) says the amount in a notice of demand (other than advance tax) must be paid within thirty days of service of the notice. A shorter period can be set in the notice only with the Joint Commissioner's previous approval, where the Assessing Officer believes the full period would be detrimental to revenue.

• Interest: section 411(3) charges simple interest at 1% for every month or part of a month, from the day after the due date until payment.
• Default: section 411(10) deems you an assessee in default if the amount is not paid within the time allowed.
• Time or instalments: section 411(5) lets the Assessing Officer extend the time or allow instalments if you apply before the due date expires.
• Waiver of interest: section 411(7) lets a senior officer (Commissioner or above) reduce or waive the interest on your application, if you show genuine hardship, circumstances beyond your control, and co-operation in the proceedings.

Example: a demand of Rs 1,00,000 is served and paid 2 months and 10 days after the 30 days end. That is 3 months or part of a month, so interest is 1,00,000 x 1% x 3 = Rs 3,000.

Can I appeal or get a demand corrected?

An appeal against an assessment or penalty must be presented within thirty days from service of the notice of demand (section 358(3)(a)). Filing an appeal does not erase the demand: section 411(2) treats the demand as valid until the last appellate authority disposes of the appeal. If the mistake is apparent from the record, section 287 allows an amendment, and where it increases the liability, section 287(7) requires a fresh notice of demand, deemed issued under section 289.

Worked example 1: a demand after assessment

Assumptions: Meena, a trader, is assessed for tax year 2026-27. The order shows tax, interest and a penalty payable. The figures are illustrative.

Step	Item	Amount (Rs)
1	Tax on assessed income, after credit for TDS and advance tax	3,40,000
2	Interest charged in the order	54,000
3	Penalty imposed by separate order	25,000
	Sum payable (1 + 2 + 3)	4,19,000

Section 289(1) applies because the sum is payable in consequence of orders under the Act. The notice of demand, in Form No. 103, must specify the Rs 4,19,000. If the penalty and the assessment are in separate orders, check whether the amounts appear in one notice or two, and match each to its order.

Worked example 2: a demand modified after an insolvency order

Assumptions: a company in insolvency has a section 289 demand of Rs 8,00,000. The Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 passes an order that reduces the sum.

1. Original demand: Rs 8,00,000.
2. Reduction ordered by the Adjudicating Authority: Rs 2,50,000.
3. Modified notice of demand under section 290(1): 8,00,000 - 2,50,000 = Rs 5,50,000.
4. The NCLAT then modifies the order so that the reduction becomes Rs 1,75,000. The notice is revised under section 290(2) to 8,00,000 - 1,75,000 = Rs 6,25,000.

Worked example 3: intimation of a business loss

Assumptions: in tax year 2026-27, Ravi's business shows a loss of Rs 6,00,000. Under section 109 he sets off Rs 1,50,000 against income under other heads, leaving Rs 4,50,000 unabsorbed. The assessment establishes the loss.

1. Loss computed by the officer and carried forward: Rs 4,50,000. Section 291 requires a written order notifying this amount, with reference to section 112.
2. Tax year 2027-28: business profit is Rs 2,00,000. Section 112(1)(i) sets the loss off against it, leaving 4,50,000 - 2,00,000 = Rs 2,50,000.
3. The balance continues to be carried forward under section 112(1)(ii), but not beyond eight tax years after 2026-27 (section 112(2)), that is, up to tax year 2034-35.

Real-life example: two notices on one desk

Sunita, a shop owner, receives an intimation after her return is processed showing Rs 38,000 payable. She assumes it is only a "message". Section 289(2) makes that intimation a deemed notice of demand, so the sum is a live demand. She checks the adjustments against her return, and pays or responds.

Her brother Anil has a different notice. His return showed a business loss, and the assessment accepts it. He receives the assessment order and a written intimation of the loss under section 291. Nothing is payable, but the intimation is what he keeps on file when he wants to set the loss off in later years.

Common mistakes

• Ignoring a processing intimation because it says "intimation". Under section 289(2), an intimation under section 270 or 399 that shows a sum payable is deemed a notice of demand.
• Not checking the demand against the order. Section 289(1) ties the demand to an order. The amounts of tax, interest and penalty should each trace to one.
• Missing the modified notice. After an insolvency order, the demand you must act on is the modified one under section 290, not the original.
• Filing away a loss intimation without comparing it. A lower figure than your own computation reduces the loss you can carry forward.
• Forgetting the carry-forward cap. Eight tax years for business and capital gains losses, four for speculation and race-horse losses.
• Missing the 14-day rule on start-up shares. The payment date is the earliest of three events, not just the sixty-month mark.

Quick reference

Item	Limit or form	Source
Notice of demand form	Form No. 103	Rule 179(1)
Demand after section 407 order	Form No. 151	Rule 179(2), rule 222
Return processing intimation, outer limit	9 months from end of the financial year of the return	Section 270(4)
Response window before adjustments	30 days from the communication	Section 270(2)(b)
TDS/TCS statement intimation, outer limit	1 year from end of the tax year of filing	Section 399(2)
Start-up shares, payment after notice	14 days from the earliest of the three events	Section 289(3)

Where this is in the Act

• Section 289: notice of demand (sub-section (2) for deemed demand, (3) for start-up shares).
• Section 290: modification and revision of notice in certain cases.
• Section 291: intimation of loss.
• Section 270 and section 399: processing of returns and of TDS/TCS statements.
• Section 411: payment period, interest and default; section 358(3): appeal limit; section 287(7): amended demand.
• Section 407(2): demand following an advance tax order.
• Sections 111, 112, 113(2) and 115(1): loss carry-forward provisions referred to in section 291.
• Rules 179 and 222: forms of the notice of demand.

For a CA firm, the hard part is keeping track of which client has which demand, which intimation shows a loss figure that differs from the books, and which response dates are running. Finexo's practice management software tracks notices and deadlines across a client book. It does not respond to notices for you.

Related reading: TDS on rent under the Income Tax Act 2025.