National Savings Scheme deduction permitted for salary TDS; withdrawals and partial interest inclusion taxable on withdrawal. Deduction for deposits in the National Savings Scheme may be allowed by drawing and disbursing officers when computing tax to be deducted at source from salaries. The statutory provision permits a deduction equal to fifty percent of deposits subject to an annual ceiling; on withdrawal fifty percent of the withdrawn amount is treated as income in the year of withdrawal, and interest on deposits is taxable only in the year of withdrawal to the extent of fifty percent. The deduction is additional to the deduction available under the other deposit-linked deduction provision.