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NSC Interest

Patricia (C.S.- Professional) (sdd) (197 Points)

26 June 2009

Hi. Dear

In the Ist year of purchase of NSC of Rs. 35,000/- what is the Tax Treatment in Ist yr, 2nd Yr, 3rd Yr, 4th Yr, 5th yr & 6th Yr. ? What is to be done for Interest part earned every year and on Maturity - Principal + Interest ? what is to be done. Pl inform required Urrently.

Regards n Gd Day

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10 Replies

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 26 June 2009

Hi Dear,

In respect of your Investment in NSC, you will get deduction u/s. 80C upto max. limit of Rs. 1,00,000/-. There is no 1st or 2nd year provision in respect of this.

In case of Interest earned on NSC, it is taxable under the head "Income from Other Sources". It is advisable to include this Interest in your Income on yearly basis instaed of on maturity.

If you don't declare this interest in your Income, then at the time of maturity of NSC you will have to pay the tax on benefit received (i.e. the difference between Amount Invested and Amount received on Maturity). However, if you declare interest as part of your Income regularly, then don't worry about the taxability of Maturity Value since it will not be taxable.

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(Guest)

you can claim 35,000 as deduction in sec 80C in each year of investment only. As for the interest part it is reinvested each year sp you can claim 80C on interest each year. On mautirity both principle + interest is taxable under the head "Income from other source" in your case.

I think this shall be helpful.

hav a nice day!!

CA Vishvesh (Chartered Accountant) (187 Points)
Replied 26 June 2009

w.r.t contribution to NSC is allowed as deduction u/s 80C the proceeds from NSC i.e. interest is charged to tax on the principle of Exempt, Exempt, Tax. In order to save on total outflow on maturity its always better to offer accrued int on NSC to tax under the head Income from other sources.

Sushil Shinde (Accountant) (32 Points)
Replied 28 December 2009

pls sir last 10 year nsc interest rate give me

RD Verma (CA. Student) (314 Points)
Replied 28 December 2009

Any subscripttion by an individual / HUF to NSC (VIII Issue). Any interest accrued on these certificates which is deemed to be reinvested also qualifies for deduction;

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Vikram Gagneja (a/c) (108 Points)
Replied 28 December 2009

any amount invested in NSC is qualified for deduction under section 80 C upto Rs.100000/-.

interest is to be calculated by assessee himself and to be added under the head income from other sources as income. because the interest is not received regularly. it is received on maturity. so it is treated as deemed to be reinvested in NSC so this is also qualified as deduction under section 80C.

if assessee regulary shows this interest under the head other sources and claims deduction then at the time of maturity whole of the amount received i.e. principal and interest is exempt from tax. but if asseess don't claim this then at the time of maturity total interest received i.e.difference between investment and amount received is taxable under the head other sources

PRAVEEN KUMAR (MBA (Finance) B.Com.(P)) (3443 Points)
Replied 28 December 2009

Dear Sushil,

This might help you to calculate interest on NSC

National Saving Certificate (VIII) is issued for 6 years. Premature withdrawl is not allowed.No TDS at the time of encashment.Can be purchased on Minor's name , but an NRI is not eligible to purchase NSC.It is available in denomination of Rs100,Rs500,Rs 1000, Rs 5000 & Rs 10,000.

Accrued Interest on NSC of Rs 100

Year of Accrual	If purchased on or after 1/3/2001 but before 1/3/2002	If purchased on or after 1/3/2002 but before 1/3/2003	If purchased on or after 1/3/2003
First year	9.72	9.20	8.16
Second Year	10.67	10.05	8.83
Third year	11.71	10.97	9.55
Fourth Year	12.85	11.98	10.33
Fifth Year	14.10	13.09	11.17
Sixth Year	15.47	14.29	12.08

Originally posted by : Sushil Shinde
	pls sir last 10 year nsc interest rate give me

@ CA. $ahar$h @ (Student) (338 Points)
Replied 28 December 2009

Hi patricia

NSC is an investment in which the interest earned every year is considered to be reinvested.So in first year u will get deduction of 35000. Now for the interest part.every year u will show interest earned in income under the head other source and will claim deduction of the same under section 80C. In the sixth year ur interest part will be taxable under the head income under the head other source.