Section 194EE of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on withdrawals from the National Savings Scheme (NSS) and certain other small savings instruments. Below is a detailed breakdown of its provisions, exemptions, and recent updates:
1. Applicability of Section 194EE
✅ Covered Payments:
- Withdrawals(principal + interest) from NSS accounts.
- Maturity proceedsfrom linked schemes like National Savings Certificates (NSC) if paid via NSS.
❌ Exclusions:
- Payments ≤ ₹2,500in a financial year.
- Payments to legal heirsof the deceased depositor.
2. TDS Rate & Deduction Rules
| PARAMETER | DETAILS |
| Standard Rate | 10% (if PAN provided) . |
| PAN Not Provided | 20% (under Section 206AA). |
| Timing | Deducted at the time of payment. |
Example:
- Withdrawal: ₹50,000 (PAN provided).
- TDS (10%): ₹5,000 → Net Receipt: ₹45,000.
3. Exemptions from TDS
No TDS is required if:
- Amount ≤ ₹2,500
- Form 15G/15His submitted (for individuals with income below taxable limits).
- Payment to heirs(on death of depositor).
Note: From August 29, 2024, NSS withdrawals are fully tax-exempt per Finance Act 2025, eliminating TDS under Section 194EE.
4. Compliance & Penalties
- Deposit Deadline:
- Non-government deductors: By the 7th of the next month(March: April 30).
- Government deductors: Same day.
- TDS Return: File Form 26Q
- Penalties:
- Late deduction: Interest @ 1% per month.
- Non-deduction: Penalty = TDS amount.
5. Key Changes (2024–25)
- Tax Exemption: NSS withdrawals post-August 29, 2024, are TDS-free.
- Interest Cessation: NSS accounts stop earning interestfrom October 1, 2024.
Key Points
🔹 Historical Rate: 10% TDS (if PAN provided).
🔹 Threshold: ₹2,500/year (pre-2024 exemption).
🔹 Post-2024: No TDS on NSS withdrawals due to tax exemption.
🔹 Legal Heirs: Exempt from TDS.
