The National Savings Scheme (NSS) allows individuals or Hindu Undivided Families (HUF) to claim deductions for amounts deposited under Section 80CCA, but the withdrawn amount, along with interest, is subject to tax if deducted earlier. No deduction has been allowed for such amounts since the assessment year 1992-93. In a significant update under the Finance Bill 2025, the government provides tax exemptions for individuals who withdraw their NSS deposits after August 29, 2024, in light of the notification issued on August 29, 2024, which discontinues interest payments on NSS balances after October 1, 2024. This tax exemption will apply only to deposits that had previously claimed deductions under Section 80CCA. As a result, individuals can withdraw their NSS funds without facing any tax liabilities. The exemption will be available for withdrawals made after August 29, 2024.
Page Contents
- FAQs: Exemption from withdrawals from National Savings Scheme (NSS) – Budget 2025
- Q1. What are the provisions relating to National Saving Scheme (NSS) prior to the changes in Finance Bill, 2025?
- Q.2 What is the change introduced in NSS by DEA notification dt. 29.8.2024?
- Q.3 What are the benefits given by Finance Bill, 2025 to NSS depositors who chose to withdraw their amounts, as no interest is to be credited in the NSS accounts on or after 1.10.2024?
- Q.4 When is the benefit available to NSS withdrawals by Finance Bill, 2025?
FAQs: Exemption from withdrawals from National Savings Scheme (NSS) – Budget 2025
Q1. What are the provisions relating to National Saving Scheme (NSS) prior to the changes in Finance Bill, 2025?
Ans. ➣ Section 80CCA allows deduction to an individual, or a HUF, for any amount deposited in the National Saving Scheme.
➣ When the amount so deposited (alongwith interest) is withdrawn during the lifetime of depositor, the same is charged to tax, if deduction was allowed under section 80CCA earlier. If the withdrawal is after his/her demise, there is no tax liability.
➣ No deduction under section 80CCA in relation to such amount is allowable since assessment year 1992-93.
Q.2 What is the change introduced in NSS by DEA notification dt. 29.8.2024?
Ans. ➣ The notification provides that no interest would be paid on the balances in the NSS after 01.10.2024.
Q.3 What are the benefits given by Finance Bill, 2025 to NSS depositors who chose to withdraw their amounts, as no interest is to be credited in the NSS accounts on or after 1.10.2024?
Ans. ➣ Section 80CCA has been amended to allow tax exemption in respect of amounts withdrawn by individual on or after 29.8.2024.
➣ The exemption has been provided only in respect of NSS deposits for which deduction u/s 80CCA was allowed earlier.
➣ This shall enable the NSS depositor to withdraw their funds lying in the NSS without any tax liability.
Q.4 When is the benefit available to NSS withdrawals by Finance Bill, 2025?
Ans. ➣ The benefit will be available to individuals who withdraw funds from their NSS accounts on or after 29.8.2024.
NSS87 Withdrawal , only amount deposited where benifit under 80CCA is availed will be exempted. Interest earned over a peroid of 33 years will be taxed while withdrawing total amount .If so there is not much benifit.
Kindly confirm
No tax will be leviable on interest accrued also since Sub section 2(a) of Sec.80CCA refers to the amount standing at the credit of the assessee in the NSS Account ( ie. principal amount together with interest accrued thereon) at the time of withdrawal on or after 29.8.2024
will this exemption of tax on NSS withdrawal be available after the budget is passed by parliament or can we claim the refund if tax is deducted by post office