Retirement planning just got better for India’s senior citizens. The government has announced a major change in tax rules that will benefit thousands of elderly savers. From April 4, 2025, no TDS (Tax Deducted at Source) will be applied on withdrawals from the National Savings Scheme (NSS).
This rule change follows confusion earlier, when many senior citizens saw TDS deducted from their NSS accounts despite earlier government announcements.
CBDT Issues Official Notification: No TDS on NSS from April 2025
The Central Board of Direct Taxes (CBDT) has now made it official. In its latest notification, the CBDT stated that TDS will not be deducted from withdrawals made from NSS accounts on or after April 4, 2025. This notification was published in the official gazette using powers given under the Income Tax Act, 1961.
Earlier, the government had announced the same relief during the Budget 2025, effective from August 29, 2024. However, in some cases, banks continued deducting TDS, causing confusion and complaints from affected senior citizens.
Now, with this formal clarification, banks and post offices must stop deducting TDS on qualifying NSS withdrawals.
What is the National Savings Scheme (NSS)?
The National Savings Scheme is a government-supported savings plan that offers safe and guaranteed returns. It was created to encourage long-term savings, especially among senior citizens. The scheme includes popular options like Senior Citizens Savings Scheme (SCSS) and other fixed-income savings tools.
Earlier, the interest earned from NSS was taxable under “Income from Other Sources,” and TDS was applied during withdrawals. This was different from other schemes like Public Provident Fund (PPF), which offers tax-free returns.
TDS on NSS Withdrawals: What Was the Issue?
Until now, TDS was deducted when money was withdrawn from NSS accounts, even for senior citizens. For many retired people who depended on these savings, this became a financial burden.
Also, some old NSS accounts had stopped earning interest, but when the money was withdrawn, tax was still deducted. This made it harder for elderly people to access their full savings.
The government recognized this problem and gave relief in Budget 2025, stating that withdrawals on or after August 29, 2024, by senior citizens, would not attract TDS.
Now, the April 2025 notification gives legal backing to this rule and clears all confusion.
Who Will Benefit the Most?
This update is especially helpful for:
- Senior citizens with NSS accounts opened years ago
- People whose NSS accounts have stopped generating interest
- Retirees withdrawing lump sum amounts for personal or health expenses
By removing TDS, the government is letting senior citizens keep their entire savings amount without any deductions. This move will also make NSS more attractive for those planning for retirement.
Budget 2025 Gave More Relief to Senior Citizens
This TDS relief is not the only benefit given to retirees in Budget 2025. Another important change was:
- Tax exemption limit on interest income was increased from ₹50,000 to ₹1 lakh for senior citizens
This means, whether it’s bank deposits, post office savings, or SCSS, seniors will now get more tax-free income every year.
This move is expected to provide financial comfort to elderly citizens, especially those living off interest income.
What About SCSS?
The Senior Citizens Savings Scheme (SCSS) is also a part of the National Savings structure. It is designed especially for retirees and offers:
- 8.2% interest rate (April 2025)
- Quarterly interest payouts
- Safe investment with government backing
With the new TDS relief, even SCSS becomes more rewarding when the money is withdrawn after maturity. For many retirees, it’s one of the best tools for fixed income.
NSS vs Other Retirement Options
With the new tax rules:
- NSS now offers tax exemption at the time of withdrawal
- PPF gives tax-free returns but has a long lock-in period
- FDs still attract TDS unless Form 15H is submitted
For many senior citizens, NSS with SCSS now offers a good balance of safety, returns, and tax efficiency.
