TDS Exemption for National Savings Scheme (NSS) Withdrawals

The Central Board of Direct Taxes (CBDT) has recently released a new notification (No. 27/2025) to ease the tax burden on small savers. The notification provides relief to individual taxpayers by exempting TDS from withdrawals under the National Savings Scheme (NSS). It specifically helps individuals rely on NSS as a long-term financial security. In this article, we’ll get a detailed look at the notification, key sections involved, and what exactly changed.

Synopsis of the Notification

The notification specifically states that no tax shall be deducted at source under Section 194EE on payments made to an individual assessee withdrawing amounts referred to in clause (a) of sub-section (2) of Section 80CCA.

In simple terms, individuals who withdraw their accumulated balances from NSS accounts, such as the NSS-87 Account, will not face any TDS deductions from the date this notification was published.

Understanding the Key Sections Involved

To understand the significance of this change, it's important to look at the relevant provisions briefly mentioned in the notification:

• Section 194EE: This section mandates TDS at 10% on premature withdrawals from NSS accounts when the amount exceeds ₹2,500, unless the withdrawal is exempted under specific provisions.
• Section 80CCA(2)(a): This section deals with withdrawals from the National Savings Scheme. If an amount, including accrued interest, is withdrawn from an NSS account where a deduction was earlier claimed under Section 80CCA(1), it becomes taxable income in the year of withdrawal.

What is the National Savings Scheme (NSS)?

The National Savings Scheme (NSS) was a government-backed savings instrument introduced to encourage small investors by offering stable returns and tax benefits. While NSS accounts like NSS-87 and NSS-92 are discontinued, many individuals still hold accounts from prior years. These schemes allowed savers to invest annually and offered tax deductions under Section 80C of the Income Tax Act. Withdrawals from NSS accounts were previously subject to taxation and TDS under Section 194EE. However, as discussed, recent CBDT notifications have exempted individual taxpayers from TDS on withdrawals under the NSS scheme.

What Has Changed?

• Earlier: Any individual withdrawing more than ₹2,500 from an NSS account was subject to 10% TDS under Section 194EE, unless specifically exempted.
• Now: With this notification, individual taxpayers withdrawing eligible balances as defined in Section 80CCA(2)(a) will not face any TDS deduction, regardless of the amount.
• Key Points:
• Applies only to individual taxpayers.
• Covers only the withdrawals specified in Section 80CCA(2)(a).
• Effective from the date of publication in the Official Gazette.

Below, we have attached the official CBDT Notification regarding the TDS on exemption for NSS Withdrawals for your reference. 

Who Benefits from This Notification?

The exemption is particularly beneficial for:

• Small savers and pensioners who rely on NSS for long-term financial security.
• Individuals seeking to withdraw matured balances without the additional burden of TDS.
• Taxpayers who would otherwise have to file returns solely to claim TDS refunds.

Need CA Consultation on TDS?

Unsure how this TDS exemption affects your tax situation? Need more clarification regarding this change? Get clarity from a qualified Chartered Accountant. IndiaFilings offers expert CA support to help you understand your TDS obligations, file accurately, and stay compliant. Whether it's TDS applicability on NSS withdrawals, related TDS or Income Tax provisions, our experts can guide you through every step. Let’s connect with our CAs now to make informed tax decisions.

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