NSC interest taxability at maturity

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This discussion clarifies the taxability of National Savings Certificate (NSC) interest when it matures. While interest is typically taxed on an accrual basis annually, a common query arises regarding how to declare it in the year of maturity, especially if previous years had no tax liability. The consensus is to declare tax on the interest accrued during the current financial year (AY 25-26) at the time of maturity, rather than the full accumulated amount. It's acknowledged that the AIS might show the full maturity interest, but this can be addressed by referencing annual interest credits if any queries arise.

Shantanu Bose

Shantanu Bose (Querist)

22 February 2025 I had invested in NSC in 2020 which matured on 2/2/25. I didn't file ITR for AY 21-22 onwards till AY 24-25 as my tax liability were NIL for all those past five years including NSC interest on accrual basis and total income were below exemption limit. But for AY 25-26 I've to file ITR as I'm taxable. Now do I have to offer tax on NSC interest on accrual basis only for this year or on receipt basis on maturity interest for AY 25-26 this year ? Please help.
Thanks

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

22 February 2025 You may declare on accrual basis.

Shantanu Bose

Shantanu Bose (Querist)

23 February 2025 Thank you sir,so I can declare tax only on interest accrued in 2025 at the time of maturity not on full accumulated interest at maturity right ? But probably in AIS,full maturity interest will be displayed. Would this create any mismatch problem and consequently defective return or I can rectify AIS in feedback and proceed as suggested by you ?
Thank you sir.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

23 February 2025 The declaration in AIS at the time of maturity is the problem for all assesses, you are not alone. In case of any query you can reply based on annual interest credits distributed for all the years.

Shantanu Bose

Shantanu Bose (Querist)

23 February 2025 Thank you very much sir

Message likes : 1 times

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

23 February 2025 You are welcome.

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