In a major relief for senior citizens, the Central Board of Direct Taxes (CBDT) has announced a complete exemption from TDS (Tax Deducted at Source) on withdrawals made from National Savings Scheme (NSS) accounts starting April 4, 2025. This announcement follows the promise made in Budget 2025, reaffirming the government’s intent to reduce the tax burden on senior citizens’ hard-earned savings.
This move corrects recent discrepancies where TDS was being deducted from NSS withdrawals despite earlier exemptions. Here’s what you need to know about the latest rules and how they benefit senior and super senior citizens across India.
NSS Withdrawal: What’s Changed in April 2025?
A fresh CBDT notification issued on April 4, 2025, now makes it official: no TDS will be deducted on withdrawals from NSS accounts, regardless of whether the account earns interest anymore. This applies to individuals withdrawing amounts under Section 80CCA(2)(a) of the Income-tax Act, 1961.
Earlier, the government had stated that withdrawals on or after August 29, 2024, would be TDS-exempt, but implementation issues led to some seniors still facing deductions. This new notification ensures clarity and enforcement.
What is the National Savings Scheme (NSS)?
The NSS is a government-secured savings plan designed to encourage long-term saving among senior citizens. It provides reliable returns and is often preferred due to its safety and steady interest income.
Unlike instruments like PPF or SCSS, NSS withdrawals were previously taxed, which significantly reduced the actual benefit received by retirees.
Taxation on NSS Withdrawals Before This Change
Until recently, any withdrawal from an NSS account was considered taxable under “Income from Other Sources.” Moreover, TDS was routinely deducted, reducing net returns for retirees. This taxation model made NSS less favorable when compared to tax-free instruments.
Key Budget 2025 Provisions for NSS Withdrawals
Budget 2025 introduced two significant reforms for seniors:
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No TDS on NSS withdrawals from August 29, 2024, onwards.
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Expanded relief under Section 80TTA and 80TTB, increasing the interest income exemption limit from ₹50,000 to ₹1,00,000 for seniors.
The April 2025 notification makes the TDS exemption effective from April 4, 2025, thereby providing immediate benefits.
Who Benefits from This Exemption?
The new exemption primarily supports:
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Senior citizens with matured NSS accounts no longer earning interest.
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Individuals withdrawing large sums from long-term savings accounts.
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Retirees depending on NSS savings for post-retirement financial needs.
This change empowers older citizens to withdraw their funds without facing automatic tax deductions, helping them retain more money for personal and medical expenses.
Additional Budget 2025 Benefits for Senior Citizens
Alongside NSS relief, Budget 2025 also includes:
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Doubling of the interest income deduction limit to ₹1 lakh.
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Further promotion of tax-efficient savings options for older citizens.
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Encouragement to invest in secure, government-backed instruments like SCSS.
FAQs
What is the new rule on NSS withdrawals starting April 2025?
Starting April 4, 2025, there will be no TDS deduction on withdrawals from NSS accounts for individual taxpayers, especially senior citizens.
Who issued the updated NSS withdrawal notification?
The Central Board of Direct Taxes (CBDT) released the official notification under Section 197A(1F) of the Income-tax Act, 1961.
What was the problem before this rule?
Despite announcements made in Budget 2025, TDS was still being deducted from NSS withdrawals in many cases, causing confusion and hardship for senior citizens.
Are NSS withdrawals now fully tax-free?
TDS has been removed, but the withdrawal may still be taxable under “Income from Other Sources” unless otherwise exempt under Income Tax laws.
How does this compare to other savings instruments like PPF or SCSS?
While PPF and SCSS offer tax-free withdrawals and assured returns, NSS had previously lagged due to TDS. This exemption now makes it more competitive and senior-friendly.
Can super senior citizens also benefit from this exemption?
Yes, both senior (60+) and super senior citizens (80+) can take advantage of this rule when withdrawing from their NSS accounts.
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