No TDS on National Savings Scheme (NSS) withdrawal by senior, super senior citizens; CBDT notifies rule

No TDS will be deducted on the amount withdrawn from the National Savings Scheme (NSS) account, according to a notification by the Central Board of Direct Taxes (CBDT). This will apply to withdrawals made on or after April 4, 2025.

"In exercise of the powers conferred by sub-section (1F) of section 197A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies that no deduction of tax shall be made under section 194EE of the Act on payment of amount referred to in clause (a) of sub-section (2) of section 80CCA, which is withdrawn by an assessee being an individual, on or after the date of publication of this notification in the Official Gazette," said the CBDT’s notification dated April 4, 2025.

Please note that NSS is different from National Savings Certificate (NSC). The latter continues to exist. NSC is currently offering 7.7% interest rate to depositors.

Who will benefit?

The notification will benefit senior and super senior citizens who continue to have their old NSS accounts and plan to withdraw their money now.

In Budget 2025, Finance Minister Nirmala Sitharaman said that withdrawals from old NSS accounts will be tax-free.

The government introduced NSS-87 in 1987, which was discontinued in 1992. Then NSS-92 was introduced in 1992 but withdrawn in 2002.

NSS-87 allowed one withdrawal in a year, but there is no limit on withdrawals from NSS-92.

In case the post office has already deducted TDS on NSS withdrawals, that amount can be claimed back as a refund by filing an income tax return. However, please note that tax refund is issued only when the total tax liability is lower than the TDS already paid to the Government.