NSC accrued interest : Tax liability

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This discussion clarifies the tax treatment of interest accrued on National Savings Certificates (NSCs). While the interest earned in the first four years is reinvested and eligible for tax deduction under Section 80C, it still needs to be declared as income under 'Income from Other Sources'. Only the interest accrued in the fifth year is directly subject to tax liability based on individual slab rates.

Raman Kumaran

Raman Kumaran (Querist)
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09 July 2022 One of my relatives have purchased NSC from Post office and as per the understanding from the postal NSC rules, the NSC yearly accrued interest is treated as reinvested along with the principal amount till 4 years, hence, eligible for tax deduction as per 80 C. The last year (5th year) accrued interest will be applicable for tax lability as per the individual slab rates.

Sir, query is that whether the yearly accrued interest of NSC upto 4 years need to show as income under 'income from other sources' when this interest was not claimed as deduction under 80C of that year or show only the 5th year accrued interest(not all the years accrued interest) as income under "income from other sources".

Your valuable advice is sought for clarifying our query on the above matter, Sir.

Please help us.

Thanking you, Sir.

Raman Kumaran

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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09 July 2022 Accrued interest is also required to be declare for all the 1st to 4th year (u/h. Income from other sources); while same can be claimed as deduction u/s. 80C.

Raman Kumaran

Raman Kumaran (Querist)
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12 July 2022 Thanks, Sir for your kind advice by clarifying our query and will do accordingly while filing IT return.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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12 July 2022 My Pleasure...

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