Notice of Demand Under Section 156: 30 Days to Pay, Interest, Stay Requests, Set-off, Appeal Windows and Penalty Show-cause

A notice of demand under section 156 tells you the tax, interest, penalty or other sum payable in consequence of an order, and section 220(1) gives you thirty days from its service to pay. After that, simple interest runs at one per cent for every month or part of a month under section 220(2), and you are deemed to be in default. You can apply for more time or instalments before the thirty days end, ask for a stay of a disputed amount while an appeal is pending, and appeal within thirty days of service; a penalty needs a show-cause notice under section 274 first.

Sources checked: 22 October 2026

Facts checked on 22 October 2026 against sections 156, 220, 245, 246A, 249, 250, 253, 270A, 271AAC, 272A and 274 of the Income-tax Act 1961 (as amended by the Finance Act 2026, on incometaxindia.gov.in), the corresponding sections of the Income-tax Act 2025, the Finance Act 2026 in the Gazette of India, and the Response to Outstanding Demand help page on incometax.gov.in.

Key facts

Point	What applies	Where it comes from
Which Act	The 1961 Act for AY 2026-27 and earlier, whenever the demand or penalty issues	Section 536(2)(c), (d), Income-tax Act 2025
Payment	Thirty days of service; shorter only with the Joint Commissioner's prior approval	Section 220(1)
Interest	1% for every month or part of a month after the period ends	Section 220(2)
Stay pending appeal	At the Assessing Officer's discretion, on conditions; no percentage in the Act	Section 220(6)
First appeal	Thirty days from service of the demand notice or the order	Section 249(2)
Second appeal	Two months from the end of the month in which the order is communicated	Section 253(3)
Penalty procedure	A show-cause notice before any penalty order; no statutory reply period	Section 274(1)
2025-Act equivalents	156 → 289; 220 → 411; 245 → 438; 249 → 358; 253 → 362; 274 → 471; 270A → 439; 272A → 465	Department's mapping utility

Which Act applies to my demand?

Section 536(2)(c) of the Income-tax Act 2025 keeps the 1961 Act in force for notices, assessments, penalties and appeals in respect of any tax year beginning before 1 April 2026, whenever they are initiated; section 536(2)(d) says penalties for those years are imposed under the 1961 Act, and section 536(2)(k) adds that an already-expired appeal period is not revived by the new Act. A demand or penalty for AY 2026-27 or earlier therefore follows the 1961 sections here; the 2025 Act's equivalents in the table apply from tax year 2026-27.

What is a notice of demand under section 156?

When any tax, interest, penalty, fine or other sum is payable in consequence of an order passed under the Act, section 156(1) requires the Assessing Officer to serve a notice of demand in the prescribed form specifying the sum payable. An intimation under section 143(1), 200A(1) or 206CB(1) that shows a sum payable is deemed a notice of demand, so the processing intimation in our guide to intimations and scrutiny notices carries the same thirty-day rule. On the portal, demands appear under Pending Actions, then Response to Outstanding Demand.

How long do I have to pay, and what interest applies?

Section 220(1) says the amount shall be paid within thirty days of the service of the notice; a shorter period needs the Joint Commissioner's prior approval. If the amount is not paid within that period, section 220(2) charges simple interest at one per cent for every month or part of a month from the day after the period ends until payment, reduced if the demand is reduced in appeal or rectification. A fourth proviso added by the Finance Act 2026 says that for assessments or reassessments made on or after 1 April 2027, no section 220(2) interest runs on a demand arising from a section 270A penalty until the first-appeal order. Under section 220(2A) the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner may reduce or waive the interest for genuine hardship where the default was beyond your control and you co-operated.

Can I get more time, instalments or a stay?

Under section 220(3), on an application made before the thirty days expire, the Assessing Officer may extend the time or allow instalments on conditions; a default in one instalment makes the whole balance due. Where an appeal is filed under section 246 or 246A, section 220(6) lets the Assessing Officer, in his discretion and on conditions, treat you as not in default for the disputed amount while the appeal is pending. The Act fixes no percentage of the demand to be paid first; the practice of paying a share before a stay comes from departmental instructions to be confirmed with our expert team.

How do I respond on the portal?

The Response to Outstanding Demand page offers "Demand is Correct" (with "Not paid yet", leading to Pay Now, or "Already paid" with the challan details) and "Disagree with demand (Either in full or in part)" with reasons from a list, paying any undisputed part. The page warns that once you submit "Demand is correct", you cannot disagree later. It mentions no deadline, interest or stay; those come from the Act.

What is a set-off intimation under section 245?

Section 245(1) lets the department set off a refund against the sum remaining payable under the 1961 Act or, since the Finance Act 2026, the Income-tax Act 2025, but only after an intimation in writing of the action proposed. Neither the section nor the portal states a response period; no thirty-day rule appears in any official source. Where an assessment or reassessment is pending, section 245(2) lets the Assessing Officer, with the Principal Commissioner's or Commissioner's approval, withhold the refund up to sixty days from the date that assessment is made.

What are the appeal windows?

First appeal (sections 246A and 249). Appealable orders include an intimation under section 143(1) or 200A(1) where the adjustments are objected to, assessment and reassessment orders, an order under section 201 and penalty orders. The appeal is due within thirty days under section 249(2): from the service of the notice of demand where it relates to an assessment or penalty, or from the date the order is served in any other case; the time taken by a pending section 270AA immunity application is excluded. A late appeal may be admitted for sufficient cause (section 249(3)), and the tax due on the returned income must have been paid first (section 249(4)).

Second appeal (section 253). An appeal to the Appellate Tribunal is due within two months from the end of the month in which the order is communicated (section 253(3)), a change made by the Finance (No. 2) Act 2024 from 1 October 2024: an order communicated on 5 November 2026 can be appealed until 31 January 2027. Cross-objections are due within thirty days, and a late appeal may be admitted for sufficient cause.

What is a penalty show-cause under section 274?

No penalty order may be made unless you have been heard or given a reasonable opportunity of being heard, which the Finance Act 2026 (from 1 March 2026) specifies must be "by way of a show cause notice to that effect" (section 274(1)). The Act fixes no reply period; the date in the show-cause notice governs. From 1 April 2027 the section 270A penalty becomes part of the assessment order itself (section 274(4) and (5)).

• Section 270A (under-reporting and misreporting): 50% of the tax on the under-reported income, or 200% where it follows misreporting such as suppression of facts, false entries or unrecorded receipts; a bona fide explanation with all material facts disclosed is excluded. Under section 270AA, as substituted by the Finance Act 2026, you may apply for immunity within one month from the end of the month of receiving the assessment order, if the tax and interest were paid within the demand period and no appeal is filed.
• Section 271AAC (unexplained income under sections 68 to 69D): 10% of the tax payable under section 115BBE(1)(i); none where the income was returned and that tax paid by the end of the relevant previous year.
• Section 272A: ₹10,000 for each default such as not complying with a section 142(1) or 143(2) notice, and ₹500 for every day a listed statement or certificate failure continues.

Reply to the show-cause notice by its date through e-Proceedings. A penalty order is appealable under section 246A(1)(q) within thirty days of service of the demand notice.

What happens if I ignore the demand?

You are deemed to be in default under section 220(4), interest keeps running, and the demand stays open for set-off against any refund under section 245; the penalty for default in payment under section 221 is to be confirmed with our expert team. An ignored penalty show-cause notice ends in a penalty order and a fresh notice of demand.

Getting help

Paste the heading of your communication into our notice decoder to see what it is. Our income-tax support covers demand responses, stay applications and appeals, and the compliance calendar keeps the dates in view. See also our guides to reassessment notices under sections 148A and 148 and TDS for MSMEs in tax year 2026-27. To have our expert team look at your demand, book a consultation or ask for a quote.