Section 34 - Insertion of new section 80CCA - Finance Act, 1987

34. Insertion of new section 80CCA In the Income-tax Act, after section 80CC, the following section shall be inserted with effect from the 1st day of April, 1988, namely :- 80CCA. Deduction in respect of deposits under National Savings Scheme. - (1) Where an assessee, being - (a) an individual, or (b) a Hindu undivided family, or (c) an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu, has in the previous year deposited out of his income chargeable to tax any amount in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf (hereafter in this section referred to as the National Savings Scheme), he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income of an amount equal to fifty per cent. of so much of the deposits (excluding interest accrued and credited to the assessee s account) as do not exceed the amount of twenty thousand rupees in the previous year. (2) Where any amount standing to the credit of the assessee under the National Savings Scheme in respect of which a deduction has been allowed under sub-section (1) together with the interest accrued on such amount is withdrawn in whole or in part in any previous year, an amount equal to fifty per cent. of the amount so withdrawn shall be deemed to be the income of the assessee of that previous year in which such withdrawal is made and shall, accordingly, be chargeable to tax as the income of that previous year. Explanation : For the removal of doubts, it is hereby declared that interest on the deposits made under the National Savings Scheme shall not be chargeable to tax except in the manner and to the extent specified in sub-section (2). .