Taxability of National Savings Scheme NSS 1987
This query is : Resolved
23 August 2020
Hi,
I have a query with respect to taxability of National Savings Scheme (NSS - 1987)
a) When is the incidence of tax liability for this? Is it only during withdrawal?
b) Whether the entire withdrawal amount will be taxed or (Withdrawal amount - Principal)?
c) Will TDS on withdrawal be deducted at 20% on entire corpus or only the cumulative interest component?
d) Whether during IT filing, the corpus has to be shown as income from other sources and tax applied as per slab rate normally? Is it correct?
I have a query with respect to taxability of National Savings Scheme (NSS - 1987)
a) When is the incidence of tax liability for this? Is it only during withdrawal?
b) Whether the entire withdrawal amount will be taxed or (Withdrawal amount - Principal)?
c) Will TDS on withdrawal be deducted at 20% on entire corpus or only the cumulative interest component?
d) Whether during IT filing, the corpus has to be shown as income from other sources and tax applied as per slab rate normally? Is it correct?
23 August 2020
Dear Mr. Roshan Speed, answer to your queries are as follows.
1. As investment in NSC can be claimed as deduction u/s 80C up to the maximum amount of Rs. 1.5 lakhs. But interest on NSC is taxable at applicable slab rate, therefore you have to show the interest amount as income from other sources but you can claim the deduction of full amount of interest because interest on NSC is again re-invested. So it is considered as a deemed investment. That is why you can claim the deduction against the interest income also, meaning thereby interest income is also virtually exempt.
2. only interest is taxable and there is no deduction against last year's interest because it is not re-invested.
3. There is no applicability of TDS on NSC. Assessee has to himself diclose the correct information in ITR.
Hope, your all queries were answered.
1. As investment in NSC can be claimed as deduction u/s 80C up to the maximum amount of Rs. 1.5 lakhs. But interest on NSC is taxable at applicable slab rate, therefore you have to show the interest amount as income from other sources but you can claim the deduction of full amount of interest because interest on NSC is again re-invested. So it is considered as a deemed investment. That is why you can claim the deduction against the interest income also, meaning thereby interest income is also virtually exempt.
2. only interest is taxable and there is no deduction against last year's interest because it is not re-invested.
3. There is no applicability of TDS on NSC. Assessee has to himself diclose the correct information in ITR.
Hope, your all queries were answered.
24 August 2020
a) Taxable in the year of withdrawal.
b) Entire withdrawal is taxable.
c) TDS is on principal as well as interest.
d) Principal and interest to be offered as income in ITR.
b) Entire withdrawal is taxable.
c) TDS is on principal as well as interest.
d) Principal and interest to be offered as income in ITR.
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24 August 2020
Thank you Karanji and Chackrapaniji. Just a small clarification Karan - We had invested in NSS 1987 not NSC. The tax treatment you mentioned was for NSC right?
24 August 2020
Yes that was related to NSC
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