National saving certificate

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 March 2017 interest accrue on nsc (except year of maturity) which is automatically reinvested and qualify for deduction u/s 80c is cover under total limit of section 80cce i.e.150000 or not? for e.g.if an assessee has an accrued interest of rs.880 in 2nd year off invesment in nsc and he has also other investment in that year amounts to rs.150000 which qualify for deduction u/s 80c. will he able claim deduction of rs.150880(150000+880) or not?

CA Gopal Somani

CA Gopal Somani (Expert)
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19 March 2017 Deposits up to Rs. 1.50 lakh in NSC qualify for Deduction Section 80C of the Income Tax Act. Accrued interest on NSC also qualifies for deduction u/s. 80C.

NSC interest is taxable. However, as it is a cumulative scheme (e.g. interest is not paid to the investor but instead accumulates in the account), each year’s interest is considered reinvested in the NSC. Since it is deemed reinvested, it qualifies for a fresh deduction under Sec 80C, thereby making it tax-free. Only the final year’s interest, when the NSC matures, does not receive a tax deduction as it does not get reinvested, but is paid back to the investor along with the interest of the earlier years and the capital amount.

Deduction limit is 150000 only, not more than that. He'll be able to claim deduction of 150000 only.

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Querist : Anonymous

Querist : Anonymous (Querist)

19 March 2017 thank you sir for your reply, if in 2011-12 investment made in nsc is of rs.10000 and interest for following 5 yrs is 858,931,1011,1098,1192,so in year of maturity investor will receive total rs.15090,now my question is whether full amt will be taxable or only interest of year of maturity i.e.1192 will be taxable?

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CA Gopal Somani

CA Gopal Somani (Expert)
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19 March 2017 Only Last year's interest (1192) will be taxable as it is not reinvested.

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Querist : Anonymous

Querist : Anonymous (Querist)

20 March 2017 thank you very very much for your support.....