The provisions relating to TDS on payments in respect of amounts standing to the credit of a subscriber under the National Pension System (NPS) have been restructured under the Income-tax Act, 2025. The earlier Section 194EE of the Income-tax Act, 1961 is now covered under Section 393(3) [Table: Sl. No. 6], effective from 1st April, 2026.
This restructuring retains the provisions relating to deduction of tax at source on payments made to subscribers under NPS, including accrued interest, while aligning the section references with the updated legislative framework.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 393(3)
- Table Reference: Table: Sl. No. 6
- Nature of Payment: Payment of amount standing to the credit of subscriber under NPS
- Earlier Section (IT Act 1961): Section 194EE
- Return Form: 26Q and 27Q
- Code (for return filing): 1066
- Rate: 10%
Applicability of TDS
TDS is required to be deducted on payments made in respect of amounts standing to the credit of a subscriber under the National Pension System (NPS), including accrued interest. The responsibility to deduct tax lies with the person making such payment, and the provisions apply to the subscriber receiving such amount.
Time of Deduction
Tax is required to be deducted at the time of making payment to the subscriber.
Rate of TDS
TDS shall be deducted at the rate of 10% on the amount payable to the subscriber. This rate is applied on the taxable portion of the payment, including any accrued interest forming part of the withdrawal.
When No TDS is Deducted
TDS shall not be deducted in certain specified cases to reduce compliance burden and avoid unnecessary deductions:
- Where the aggregate amount paid during the financial year does not exceed ₹2,500, no tax is required to be deducted.
- Where the payment is made to the nominee or legal heir of a deceased subscriber, the provisions of TDS are not applicable.
- Where a valid declaration is furnished under Section 393(4) (earlier Form 15G/15H, now Form 121), and the conditions for non-deduction are satisfied, no TDS is required to be deducted.
Additional Applicability for Non-Residents (As per IT Act 2025)
- Nature of Payment: Any amount referred to in section 80CCA(2)(a) of the Income-tax Act, 1961 (43 of 1961)
- Previous Section (IT Act 1961): Section 194EE
- New Section Reference: Section 393(3) [Table: Sl. No. 6]
- Rate: 10%
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