Circular No. 532

What it does

Holds that the deeming provision in section 80CCA(2) does not reach the legal heirs. Where the amount standing to an assessee's credit under the National Savings Scheme, on which a deduction was allowed under section 80CCA(1), is paid to his legal heirs on his death, that payment is outside section 80CCA(2) and is not chargeable in the heirs' hands. The same is held for the Gross Insurance Value Element paid under the Life Insurance Corporation annuity plans referred to in section 80CCA(1)(ii) to the nominee or legal heirs after the assessee's death.

Why it was issued

A question was raised whether the amount received under the National Savings Scheme by an assessee's legal heirs after his death can be deemed to be their income under section 80CCA(2).

Who it reaches

Legal heirs and nominees of a deceased National Savings Scheme depositor
Nominees under the specified Life Insurance Corporation annuity plans
Assessing Officers taxing withdrawals under section 80CCA(2)

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.8OCC	no counterpart recorded
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.

511. Taxability of repayment of amount from the account under National Savings Scheme to the legal heirs of assessee
1. Sub-section (2) of section 80CCA of the Income-tax Act, 1961, provides that where any amount standing to the credit of an assessee under the National Savings Scheme, in respect of which a deduction had been allowed under sub-section (1) of the said section, is withdrawn in whole or in part in any previous year, the amount withdrawn shall be deemed to be the income of the assessee of that previous year.
2. A question has been raised whether the amount received under the National Savings Scheme by the legal heirs of an assessee after his death can be deemed to be the income of the legal heirs under section 80CCA(2).
3. The Board is of the view that where the amount credited to the account of an assessee under the National Savings Scheme is paid on the death of the assessee to his legal heirs, the amount so paid will not fall within the ambit of section 8OCCA(2) and, accordingly, the amount of such repayment will not be chargeable to tax in the hands of the legal heirs.
4. Similarly, the amount paid by way of Gross Insurance Value Element under the annuity plans of Life Insurance Corporation as referred to in clause (ii) of sub-section (1) of section 80CCA to the nominee or legal heirs of the assessee after his death will also not be covered by the provisions of section 80CCA(2) and will, accordingly, not be chargeable to income-tax in their hands.
Circular : No. 532, dated 17-3-1989.

What to watch

The exclusion is for payment on the death of the assessee - a withdrawal by the assessee in his lifetime remains deemed income under section 80CCA(2).
The second limb is confined to the Gross Insurance Value Element under the annuity plans referred to in section 80CCA(1)(ii).
Section 80CCA has since been closed to new deposits and rewritten; this construes it as it then stood.

Where you meet it

In the assessment of legal heirs where a National Savings Scheme payment on death has been added as deemed income.

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.

Circular No. 531 — 510. Date of application of annuity plan of LIC 17 March 1989
Notification No. 27/2025 [F. No. 370142/13/2025-TPL] / SO 1615(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 4 April 2025
Notification No. 143 — Amendment of the Income-tax Rules under section 80CCA of the Income-tax Act, 1961 9 June 2003
Circular No. 629 — Financial Year 1992-93 31 July 1992
Circular No. 618 — Section 194EE l Payments in Respect of Deposits under NSS, ETC 22 November 1991
Circular No. 534 — 512. Repayment of amount on the closure of account under NSS - Taxability of 7 April 1989

← Circular No. 531 · Circular No. 530 →

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.

What this is