Section 80CCA of the Income-tax Act provides deductions for deposits made under the National Savings Scheme (NSS) before April 1, 1992. Under existing rules, withdrawals from these deposits, including accrued interest, are considered taxable income. However, a notification issued on August 29, 2024, announced that no interest would be paid on NSS balances after October 1, 2024, leading to concerns among depositors. To address this, the Finance Bill, 2025 proposes an amendment to Section 80CCA, exempting withdrawals made by individuals from these deposits from taxation, provided the original deposit was made before April 1, 1992. This amendment applies retrospectively from August 29, 2024, ensuring relief for affected depositors.
Budget 2025: Exemption to withdrawals by Individuals from National Savings Scheme from taxation
Section 80CCA, inter-alia, provides for a deduction to an individual, or a Hindu undivided family, for any amount deposited in the National Savings Scheme (NSS). It is also provided that no deduction would be allowed in relation to such amount on or after the 1st day of April, 1992.
2. Sub-section (2) of section 80CCA, inter-alia, provides that where such amount, together with the interest accrued on such amount standing to the credit of the assessee under the scheme is withdrawn, it shall be deemed to be the income of the assessee and shall be chargeable to tax. Since this provision has been sunset from 01.04.1992, the amounts taxable on withdrawal are those which were deposited in financial year 1991-92 and earlier, and on which deduction had been claimed. Further, Circular No 532 issued on 17.03.1989 provided that the withdrawal on closure of account due to death of the depositor was not chargeable to tax in the hands of the legal heirs.
3. The Department of Economic Affairs issued a Notification dated 29.08.2024 providing that no interest would be paid on the balances in the NSS after 01.10.2024. Representations were received to suitably amend section 80CCA to provide relief to individuals facing hardship who were compelled to withdraw as a result of this Notification.
4. It is therefore proposed to amend section 80CCA to provide exemption to the withdrawals made by individuals from these deposits for which deduction was allowed, on or after 29th day of August, 2024. This exemption is provided to the deposits, with the interest accrued thereon, made before 01.04.1992 as these are the amounts in respect of which a deduction has been allowed.
5. This amendment shall be made with retrospective effect from the 29th day of August, 2024.
[Clause 16]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 16 of the Bill seeks to amend section 80CCA of the Income-tax Act, relating to deduction, inter alia, in respect of deposits under National Savings Scheme.
Sub-section (1) of the said section, inter alia, provides that a deduction of the whole of the amount deposited or paid (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of twenty thousand rupees in the previous year.
Sub-section (2) of the said section, inter alia, deems the withdrawals of amounts together with the interest accrued on such amount, as income chargeable to tax in the previous year when these amounts (or interest accrued on such amount) are withdrawn.
It is proposed to provide exemption from the provisions of sub-section (2) of section 80CCA to such withdrawals made on or after 29th August, 2024 by an assessee, being an individual.
This amendment will take effect retrospectively from 29th August, 2024.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
16. Amendment of section 80CCA.
In section 80CCA of the Income-tax Act, in subsection (2), after the first proviso, the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 29th August, 2024, namely:––
“Provided further that the amount referred to in clause (a) which is withdrawn on or after the 29th August, 2024, shall not be charged to tax in the case of an assessee, being an individual.”.
KINDLY UPLOAD CBDT ORDER OR NOTIFICATION/CIRCULAR WHICH EXEMPTS TAX ON NSS 1987 SCHEME WITHDRAWALS WEF AUG/OCT 24. ONLY PRESS INTIMATIONS ARE AVAILABLE TILL NOW ICLUDING YOUR ARTICLES.
I had opened a National Savings Scheme 1987 account at a Post Office in Trivandrum on 15/03/1990 with an initial deposit of Rs.25,000/- and I made further remittances of Rs,25,000/- on 30/03/1991 and Rs.30,000/- on 26/03/92. The balance in the account has grown to Rs.12,71,122/- as on 31/03/2024. I have not made any withdrawals so far. In view of the notification of DEA dated 29/08/2024, If I withdraw the whole amount now, will it attract any TDS and whether the amount has to be added on to the current year’s income. Please advise me.
so far notification to the above budget proposal is not there,can we withdraw before passing of budget by parliament and the withdrawal will be tax free..Pl clarify.