Taxability of National Savings Scheme NSS 1987

Save Share

This query is : Resolved

Quick Summary

This discussion clarifies the tax treatment of the National Savings Scheme (NSS) 1987, distinguishing it from the National Savings Certificate (NSC). Key points include that tax liability arises upon withdrawal, and the entire withdrawal amount is subject to tax. It's also clarified that TDS is deducted on both the principal and interest components, and the full corpus, including principal and interest, should be declared as income during IT filing.

roshn

roshn (Querist)
Follow

23 August 2020 Hi,

I have a query with respect to taxability of National Savings Scheme (NSS - 1987)
a) When is the incidence of tax liability for this? Is it only during withdrawal?
b) Whether the entire withdrawal amount will be taxed or (Withdrawal amount - Principal)?
c) Will TDS on withdrawal be deducted at 20% on entire corpus or only the cumulative interest component?
d) Whether during IT filing, the corpus has to be shown as income from other sources and tax applied as per slab rate normally? Is it correct?

CA KARAN SINGH

CA KARAN SINGH (Expert)
Follow

23 August 2020 Dear Mr. Roshan Speed, answer to your queries are as follows.
1. As investment in NSC can be claimed as deduction u/s 80C up to the maximum amount of Rs. 1.5 lakhs. But interest on NSC is taxable at applicable slab rate, therefore you have to show the interest amount as income from other sources but you can claim the deduction of full amount of interest because interest on NSC is again re-invested. So it is considered as a deemed investment. That is why you can claim the deduction against the interest income also, meaning thereby interest income is also virtually exempt.
2. only interest is taxable and there is no deduction against last year's interest because it is not re-invested.
3. There is no applicability of TDS on NSC. Assessee has to himself diclose the correct information in ITR.

Hope, your all queries were answered.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

24 August 2020 a) Taxable in the year of withdrawal.

b) Entire withdrawal is taxable.

c) TDS is on principal as well as interest.

d) Principal and interest to be offered as income in ITR.

Message likes : 1 times

roshn

roshn (Querist)
Follow

24 August 2020 Thank you Karanji and Chackrapaniji. Just a small clarification Karan - We had invested in NSS 1987 not NSC. The tax treatment you mentioned was for NSC right?

CA KARAN SINGH

CA KARAN SINGH (Expert)
Follow

24 August 2020 Yes that was related to NSC

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now