"A small step in simplification, a big leap for investor confidence."
The Central Board of Direct Taxes (CBDT) has recently notified a key relief for individual taxpayers by exempting Tax Deducted at Source (TDS) under Section 194EE on withdrawals from certain notified savings schemes.
Notification No. 27/2025 [S.O. 1615(E)], dated April 4, 2025
Issued under the powers granted by Section 197A(1F) of the Income-tax Act, 1961.
Understanding the Provisions
Let’s break down the relevant sections:
| Section | Subject | Explanation |
|---|---|---|
| Section 194EE | TDS on NSS and other notified schemes | Required tax deduction at 10% on withdrawal exceeding ₹2,500 from savings schemes (like NSS) if PAN not furnished. |
| Section 80CCA(2)(a) | Contributions & withdrawals under notified schemes | Allows deduction on contributions made to schemes like NSS (National Savings Scheme) under Chapter VI-A, but withdrawals were taxable. |
| Section 197A(1F) | Power to exempt TDS by CBDT | Enables the Central Government to notify certain payments on which TDS shall not be deducted. |
New Notification — What’s Changed?
Under the latest CBDT Notification No. 27/2025, if an individual taxpayer withdraws amounts from schemes covered under Section 80CCA(2)(a), no TDS will be deducted under Section 194EE, effective from April 4, 2025, the date of publication in the Official Gazette.
What Are These Schemes?
Though National Savings Scheme (NSS) is no longer open for fresh subscriptions (discontinued in the early 2000s), many investors still hold legacy accounts under such notified schemes. Other similar schemes notified under Section 80CCA(2)(a) may include certain Post Office Savings Plans and Public Sector Provident-type schemes notified earlier.
These schemes earlier offered deductions at the time of investment but taxed withdrawals, which were also subject to TDS under Section 194EE if the amount exceeded ₹2,500 and PAN was not furnished.
Illustration
Example:
Mr. Rajiv, an individual investor, had deposited ₹50,000 in the NSS in the late 1990s. In April 2025, he decides to withdraw the maturity proceeds.
Before Notification:
If Rajiv withdrew ₹30,000, the bank or post office would deduct TDS @10% under Section 194EE (₹3,000), unless he furnished Form 15G or PAN.
After Notification:
Now, no TDS will be deducted, regardless of the amount withdrawn, giving Rajiv full access to his funds without administrative hassles.
Note: The withdrawal may still be taxable in his hands under the head “Income from Other Sources,” and should be reported in the ITR.
Takeaways
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Relief applies only to individual taxpayers withdrawing from schemes covered under Section 80CCA(2)(a).
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TDS exemption under Section 194EE will reduce compliance burden for small investors.
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The actual taxability of the amount still remains as per applicable slab in the taxpayer’s hands.
This move is particularly relevant for retirees and senior citizens who still hold older savings scheme accounts, ensuring that their withdrawals are not reduced by unnecessary tax deduction at source, especially when they may not have taxable income at all.
Official Gazette Reference:
[Notification No. 27/2025 dated April 4, 2025 – S.O. 1615(E)]
Issued by the Ministry of Finance, CBDT, under F. No. 370142/13/2025-TPL
