Circular No. 511

1373. Whether exemption of the deposits made under the National Savings Scheme, 1987, from wealth-tax, as per clause (xxvb) of sub-section (1) is not subject to the limit of Rs. 5 lakhs specified in sub-section (1A)

What this is

Circular No. 511 was issued by the Central Board of Direct Taxes on 10 May 1988. Its subject is 1373. Whether exemption of the deposits made under the National Savings Scheme, 1987, from wealth-tax, as per clause (xxvb) of sub-section (1) is not subject to the limit of Rs. 5 lakhs specified in sub-section (1A).

This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.

What it does

Clarifies that the wealth-tax exemption for deposits under the National Savings Scheme, 1987, given by clause (xxvb) of section 5(1) of the Wealth-tax Act, is not subject to the Rs. 5 lakhs ceiling in section 5(1A) of that Act. Such deposits are exempt from wealth-tax without any limit. The last sentence of paragraph 31.1 of the Board's Circular No. 495 dated 22-9-1987, the explanatory notes on the Finance Act, 1987, is modified to that extent. The Finance Act, 1987 had introduced section 80CCA for investments under the Scheme, with a corresponding amendment in the Wealth-tax Act.

Why it was issued

References were received asking whether investments under the Scheme are exempt from wealth-tax without limit or only up to Rs. 5 lakhs together with the other assets specified in section 5(1A).

Who it reaches

Depositors under the National Savings Scheme, 1987 assessed to wealth-tax
Assessees whose other exempt assets already exhausted the Rs. 5 lakhs ceiling
Wealth-tax Officers applying section 5(1A)

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.5	s.5
s.80CCA	no counterpart recorded

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

1373. Whether exemption of the deposits made under the National Savings Scheme, 1987, from wealth-tax, as per clause (xxvb) of sub-section (1) is not subject to the limit of Rs. 5 lakhs specified in sub-section (1A)
1. The Finance Act, 1987 introduced a new section 80CCA to provide for deduction in respect of investments made under the National Savings Scheme, 1987. Corresponding amendment was made in the Wealth-tax Act to provide for exemption from wealth-tax in respect of deposits made under this Scheme.
2. References have been received from some quarters enquiring whether the investments made under the Scheme are exempt from wealth-tax without limit or whether the exemption is limited up to Rs. 5 lakhs together with other specified assets provided in section 5(1A).
3. It is hereby clarified that the exemption of the deposits made under the National Savings Scheme, 1987, from wealth-tax, contained in clause ( xxvb) of sub-section (1) of section 5 of the Wealth-tax Act is not subject to the limit of Rs. 5 lakhs specified in sub-section (1A) of section 5 of that Act. The deposits under the Scheme are exempt from wealth-tax without any limits. Accordingly, the last sentence of paragraph 31.1 of the Board’s Circular No. 495 dated 22-9-1987, containing the Explanatory Notes on the provisions of the Finance Act, 1987, relating to direct taxes stands modified.
Circular : No. 511 [F. No. 134/8/88-TPL], dated 10-5-1988.

What to watch

This is a Wealth-tax Act point - section 5(1)(xxvb) and section 5(1A) are in that Act, though the deposit also carried a section 80CCA income-tax deduction.
It modifies the last sentence of paragraph 31.1 of Circular No. 495 dated 22-9-1987, so that earlier explanatory note should not be relied on as it stands.
Because the deposits are outside the ceiling, they do not eat into the Rs. 5 lakhs available for the other specified assets.
Wealth-tax has since been abolished and the Scheme closed to fresh deposits.

Where you meet it

In old wealth-tax assessments where National Savings Scheme deposits were counted against the section 5(1A) ceiling.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 13/2024 [F.No. C-14011/41/2018-V&L] / SO 312(E) — Ministry of Finance 19 January 2024
Notification No. 12/2024 [F.No. C-14011/46/2018-V&L] / SO 311(E) — Ministry of Finance 19 January 2024
Circular No. 22/2022 — Condonation of delay under section 119 2 b of the income tax act 1961 in filing of form no.10a 1 November 2022
Notification No. 93/2021 [F.No. 370142/34/2021-TPL(Part III)] / GSR 578(E) — Ministry of Finance 18 August 2021
Circular No. 3/2021 — Circular under section 10 of the direct tax vivad se vishwas act 2020 4 March 2021
Circular No. 21/2020 — Clarifications on provisions of the direct tax vivad se vishwas act 2020 4 December 2020

← Circular No. 512 · Circular No. 507 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.