Hello every one, I have a query. That one of our client purchased NSC aprox. 2lac in 2004 and not to showed the interest of nsc in the ITR's of the past years and now NSC matured in year 2010, And i suggest him to show the interest in his return and pay Tax upon the interest earned inn last year i.e. 2010 and use the amount in business (and also said that his past year interest is exempted because interest is added backed to the amount of NSC)............u all please suggest that i made a good reply or not?
3 Replies
C.A. Jignesh N. Mehta
(C.A.)
(1030 Points)
Replied 10 July 2011
Interest on NSC is taxable and the tax liability arises on accrual basis.
Since the assessee missed out the accrual of interest in earliar years, the same now will be taxed in year of maturity.
So full amount recd on maturity - intial deposit amount = interest income taxable in year of maturity .... only because of non accrual.
I suggest to check out section 88 , whether rebate can be taken or not.
wait for further replies from others.
vinay sharma
(CA final (Article))
(327 Points)
Replied 11 July 2011
sir i agree with u that nsc int is taxable when accrued but the same amt. of int. is also re invested and deduction of the same amount is allowed u/s 80c........with this reason the amt of interest is taxable in the last year only ,,,am i right?
C.A. Jignesh N. Mehta
(C.A.)
(1030 Points)
Replied 11 July 2011
Firstly it is to be seen what method does assessee follow - mercantile or cash.
NSC interest will be allowed as investment u/s 80C even if assessee follows cash system.
Can you clarify your query for taxing the NSC interest in last year and claiming deduction under 80C.
Purpose behind the same.
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