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Beat softened butter at medium speed with an electric mixer until creamy. Gradually add 1 cup granulated sugar, beating until light and fluffy. Add eggs, 1 at a time, beating just until blended after each addition.
Stir together flour, baking powder, and salt; add to butter mixture alternately with milk, beating at low speed just until blended, beginning and ending with flour mixture. Stir in 1 tablespoon lemon rind. Spoon batter into greased and floured 8- x 4-inch loafpan.
Bake at 350° for 1 hour or until a wooden pick inserted in center of bread comes out clean. Let cool in pan 10 minutes. Remove bread from pan, and cool completely on a wire rack.
Stir together powdered sugar and lemon juice until smooth; spoon evenly over top of bread, letting excess drip down sides. Stir together remaining 1 tablespoon lemon rind and 1 tablespoon granulated sugar; sprinkle on top of bread.
Lemon-Almond Tea Bread: Stir 1/2 teaspoon almond extract into batter. Proceed as directed.