IN A REF. BOOK I SHOW ONE EXAMPAL, THAT IS ONE NSC PUR. AT 10000 RS. DATED 12/12/2000. AT THE TIME OF COMPUTING RETURN FOR THE P.Y. OR FINANCIAL YEAR 2000 - 01, CALCUATION OF INTEREST FOR THAT NSC FOR THAT REMAINING PERIOD ( FROM 13/12/2000 TO 31/3/2001 )IS NOT TAKEN IN COMPUTATION. AND IN F.Y. 2001 - 02 INTEREST IS CALCULATED FOR THE WHOLE YEAR AND GOES ON FOR OTHER F.YEARS.
[ Q.1 WHY FOR THAT RAMAINING PERIOD ( FROM 13/12/2000 TO 31/3/2001 ) INTEREST IS NOT CALCULATED AT TIME OF COMPUTATION ? ]
[ Q.2 THERE IS ANY RULE THAT FOR CALCULATION OF INTEREST AT THE TIME OF PUR. YEAR INT. IS NOT TAKEN INTO CONSIDERATION ? ]
11 December 2007
THERE IS NO RULE THAT IN THE YEAR OF PURCHASE INTEREST IS NOT CALCULATED ON NSC. THE PRINCIPAL AMOUNT, THE MATURITY AMOUNT , DATE OF PURCHASE AND DATE OF MATURITY , RATE OF INTEREST ARE ALL SHOWN ON THE FACE OF ANY NSC. WE HAVE TO GO BY THE SAME. THERE IS NO OTHER RULE OR PRESUMPTION CONTRARY TO WHAT IS SHOWN ON FACE OF NSC. THE REFERENCE BOOK ABOUT WHICH YOU HAVE STATED, PERHAPS MEANT THAT SINCE INTERST ACCRUES ON YEARLY INTERVALS , NO INTEREST NEEDS TO BE SHOWN FOR 3 MONTHS. YES. INTEREST ON INTEREST IS CALCULATED ie INTEREST IS CUMULATED IN NSC. R.V.RAO
12 December 2007
(1) The Postal Department calculates Interest right from the date of purchase upto the time of maturity. The Buyer therefore does not lose any Interest for any "broken period"
(2) Interest is compounded half-yearly
(3) For the purpose of claiming Deduction u/s 80-C and also subjecting Accrued Interest to Income-tax, in the normal course, every Buyer needs to calculate --
(a) Interest from the date of investment upto 31st of Mar of the PY in which NSC is purchased and
(b)Interest from 1st Apr upto the date of maturity in the PY in which NSC is matured
(4) Considering the complexity of calculatiions and keeping materialy aspect in view, the Govt., perhaps specifies year wise amounts of Accrued Interest both the purpose of claiming Deduction u/s 80-C and taxing the Accrued Interest IGNORING the actual date of purchase in the first PY and date of maturity in the last PY as tabled in Para 107.1-2c of 30th edition of Singhania's Direct Taxes Ready Reckoner. These rates of Accrued Interest are only for the limited purpose of Income Tax. All Buyers get Interest for actual period of NSC and do not lose any Interest