CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194EE — Payments in Respect of Deposits Under the National Savings Scheme (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live but spent. Confined to legacy NSS (section 80CCA) withdrawals.
Finance Act, 2026: No amendment.
Mechanism: The payer of an NSS deposit withdrawal (deemed income under section 80CCA(2)) deducts tax at the prescribed rate where the payment reaches the threshold; no deduction on payment to heirs of a deceased depositor.
Litigation profile: None. A narrow, essentially spent provision — the candour rule applies.
A. SECTION COMMENTARY
Section 194EE requires the person responsible for paying any amount referred to in clause (a) of sub-section (2) of section 80CCA — that is, deposits under the National Savings Scheme together with interest thereon, on withdrawal — to deduct tax at the prescribed rate where the payment in a financial year reaches the threshold. It collects the charge that arises when an NSS deposit (on which a deduction was earlier allowed under section 80CCA) is withdrawn, the withdrawal being deemed income under section 80CCA(2).
A narrow, scheme-specific provision
The section is confined to the now-historic National Savings Scheme deposits under section 80CCA; no deduction is required on payment to the heirs of a deceased depositor. With the closure of fresh NSS contributions long ago, the provision is essentially run-off and applies only to legacy withdrawals.
Why authority is absent
Section 194EE is mechanical, scheme-specific and, in practice, spent. There is no body of judicial authority construing it. In candour, the section must be applied from its terms read with section 80CCA, and with the general machinery and default provisions of the Chapter.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194EE. The person responsible for paying to any person any amount referred to in clause (a) of sub-section
(2) of section 80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of ten per cent :
Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees :
Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee.
C. AUTHORITIES
Candour rule strictly observed: section 194EE is a narrow, essentially spent provision with no judicial authority. Only the statutory backdrop is offered.
Principle: The withdrawal of an NSS deposit (on which a section 80CCA deduction was allowed) is deemed income in the year of withdrawal; section 194EE is the deduction mechanism for that deemed income. Payment to the legal heirs of a deceased depositor is outside the deduction obligation.
Use: Locates the charge that section 194EE collects against.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194EE.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194EE — Payments in Respect of Deposits Under the National Savings Scheme (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live but spent. Confined to legacy NSS (section 80CCA) withdrawals.
Finance Act, 2026: No amendment.
Mechanism: The payer of an NSS deposit withdrawal (deemed income under section 80CCA(2)) deducts tax at the prescribed rate where the payment reaches the threshold; no deduction on payment to heirs of a deceased depositor.
Litigation profile: None. A narrow, essentially spent provision — the candour rule applies.
A. SECTION COMMENTARY
Section 194EE requires the person responsible for paying any amount referred to in clause (a) of sub-section (2) of section 80CCA — that is, deposits under the National Savings Scheme together with interest thereon, on withdrawal — to deduct tax at the prescribed rate where the payment in a financial year reaches the threshold. It collects the charge that arises when an NSS deposit (on which a deduction was earlier allowed under section 80CCA) is withdrawn, the withdrawal being deemed income under section 80CCA(2).
A narrow, scheme-specific provision
The section is confined to the now-historic National Savings Scheme deposits under section 80CCA; no deduction is required on payment to the heirs of a deceased depositor. With the closure of fresh NSS contributions long ago, the provision is essentially run-off and applies only to legacy withdrawals.
Why authority is absent
Section 194EE is mechanical, scheme-specific and, in practice, spent. There is no body of judicial authority construing it. In candour, the section must be applied from its terms read with section 80CCA, and with the general machinery and default provisions of the Chapter.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194EE. The person responsible for paying to any person any amount referred to in clause (a) of sub-section
(2) of section 80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of ten per cent :
Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees :
Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee.
C. AUTHORITIES
Candour rule strictly observed: section 194EE is a narrow, essentially spent provision with no judicial authority. Only the statutory backdrop is offered.
No direct authority — statutory backdrop
Charge under section 80CCA(2)
Principle: The withdrawal of an NSS deposit (on which a section 80CCA deduction was allowed) is deemed income in the year of withdrawal; section 194EE is the deduction mechanism for that deemed income. Payment to the legal heirs of a deceased depositor is outside the deduction obligation.
Use: Locates the charge that section 194EE collects against.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194EE.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.