Tax Deducted at Source (TDS) is a method of collecting tax at the time of payment. Section 194EE of the Income Tax Act, 1961 governs TDS on payments made for deposit under the National Saving Scheme (NSS). In this article, we will discuss about TDS for deposits to NSS in detail.
It is a government-sponsored savings scheme that aims to mobilize savings among the masses. The scheme offers various investment options, such as Post Office Savings Account, Public Provident Fund (PPF), National Savings Certificate (NSC), and Kisan Vikas Patra (KVP), among others.
The section 194EE deals with TDS for deposits to NSS. According to the section, section, any payment made to an individual who is a resident of India for the purpose of investment in NSS is subject to TDS. The rate of TDS is 10%, and it is deducted at the time of payment.
Suggested Read: TDS Rate Chart for the 2023-24
The TDS under Section 194EE applies to all deposits made under the National Saving Scheme, including NSC, PPF, KVP, etc. The interest earned on these deposits is taxable under the head “Income from Other Sources.” The TDS on such interest is required to be deducted at the time of payment or credit of interest, whichever is earlier.
The rate of TDS for deposits to NSS is 10%. This means that if an individual invests INR 1,00,000 in NSS, the TDS deducted will be INR 10,000. The remaining amount of INR 90,000 will be credited to the NSS account.
To file TDS for deposits to NSS, the following steps need to be taken:
Tax is not required to be deducted in the following circumstances:
Non-compliance with the provisions of Section 194EE can attract penal consequences. If the TDS is not deducted, or the deducted TDS is not remitted to the government, the person responsible for deducting TDS can be held liable to pay interest at the rate of 1% per month or part of the month. Additionally, a penalty can be imposed under Section 271C of the Income Tax Act, which can be a minimum of INR 10,000 and a maximum of INR 1 lakh.
In conclusion, Section 194EE of the Income Tax Act governs TDS on payments made for deposits to NSS. The TDS for Deposits to NSS (National Saving Scheme), including NSC, PPF, KVP, etc., if non complied with, may attract hefty penalties.
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