In F.Y.2014-15 my NSC of Rs.90,000/- matured & I got interest of Rs.54,090/- on it. I also reinvest 1,20,000/- in NSC. So is the Interest on NSC is taxable or tax free.
21 August 2015
NSC interest is taxable. However, as it is a cumulative scheme, each year’s interest is considered reinvested in the NSC. Since it is deemed reinvested, it qualifies for a fresh deduction under Sec 80C, thereby making it tax-free. Only the final year’s interest, when the NSC matures, does not receive a tax deduction as it does not get reinvested, but is paid back to the investor along with the interest of the earlier years and the capital amount.
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