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Interest on nsc and itr

Dipak Rajkhowa (Engineer) (25 Points)

28 August 2014

Hi friends, as per my knowledge if the accrued interest from NSC is shown as "Income from other sources" in ITR, it is exempted under 80C since interest earned is reinvested. But 5th year interest is not exempted since it dosen't get reinvested.

Now, at the time of maturity will the Post office deduct tax on interest for all 5 years or only the last year? Do I need to show them the ITRs for these years? Please clarify as I am little confused.

Dipak

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5 Replies

CA Saloni (Manager-Accounts & GST Consultant) (5124 Points)
Replied 28 August 2014

Dear Dipak, NSC interest is not eligible for TDS deduction.......

Ajay (CA Job) (512 Points)
Replied 29 August 2014

Dear Dipak

The interet accrued on NSC has to be shown under "income from other sources" every year and for the first 4 years you can claim the same under Sec.80C (subject to the limit) for the respective years and for the 5th year, you will be showing the income as "income from other sources" but you cannot claim deduction under 80C since, as you rightly said, it is not being reinvested.

And, as Saloni said NSC interest in liable to TDS. Please note that the interest for the last year will be taxed in your hands as per the slab rate even though there is no TDS.

Regards

Ajay

Dipak Rajkhowa (Engineer) (25 Points)
Replied 29 August 2014

Dear Saloni/Ajay...thanks for your reply

My confusion is if I claim the interest accrued on NSC under Sec.80C for the respective years and dont show it under "income from other sources" then what? Who will tax the interest after maturity? My employer or Post office?

Ajay (CA Job) (512 Points)
Replied 29 August 2014

Dear Dipak

First of all, in the previous message i meant to say "NSC interest in NOT liable to TDS".

Now coming to your query, if you make a claim for deduction u/s 80C without disclosing your corresponing interest income under the head "Income from other Sources", that amounts to wrong claim in the ITR. Since interest on NSC is NOT liable to TDS, the Post office will not be deducting tax. However, if you have declared your income from other sources including interest on NSC to your employer, he would have already considered the same and deducted the TDS from your salary accordingly. You can check the Form 16 issued to you. Again, the employer would have considered NSC interest only if you have specifically made a written declaration of your such other incomes to him/her and not otherwise.

Regards

Ajay