FAQ on NSC

FAQs

Can Income Tax exemption under Section 88 be claimed by the second- named person in case of a joint-holding NSC ?

By all means. In case of a joint holding, the deduction under Section 88 of the Income Tax Act, 1961 can be claimed by either the first holder or the second holder depending on who has contributed the amount.

Can one claim the Section 88 benefit on the interest on the NSC scheme which is deemed to have been reinvested ?

The interest accruing at the end of each year and deemed to have been reinvested upto the 5th year does qualify for tax rebate under section 88 of Income Tax Act.

Will the income tax rebate under Section 88 be available to the husband/father in those cases where the NSCs are purchased by him out of his income in the name of his wife/minor children ?

No, as clarified by the CBDT in their letter No.DIR(HQ)/CH(DT)95/1090 dated 22.8.1995, father/husband cannot claim rebate under section 88 of the ITA where the investment in NSC is made out of the income of wife/minor child.

If the holder of a Savings Certificate dies, who gets the amount due to be paid to the deceased ?

Similar to Bank Accounts a nomination facility is available and necessary for Savings Certificate Schemes and the nominee receives the proceeds due to the deceased person.

If a person dies and is the holder of a savings certificate at the time of death and there is no nomination in place at the time of his death and probate of his will or letters of admiration of his estate or a succession certificate granted under the Indian Succession Act, 1925 (39 of 1925) is not submitted within the three months of the death of the holder to the prescribed authority, then if the sum due on the savings certificate does not exceed the limit as may be prescribed, the concerned authority may disburse the amount to any person appearing to receive it, who will be entitled to receive the sum or to administer the estate of the deceased.

In case of minors where a nominee has not been appointed, the payment can be made to any guardian of the property of the minor appointed by a competent court, or to either parent of the minor.

If a girl makes a deposit and gets married by the time the deposits matures, would there be any problems ?

Any deposit made by or on behalf of a married woman, or on behalf of a woman who marries after the deposit and before it matures, can receive the deposit on maturity , whether or not section 20 of the Indian Succession Act 1925 (39 of 1925) applies to her marriage. The receipt for the money paid to her under this section shall be a sufficient proof of payment.

Can the 'Karta' of a Hindu Undivided Family (HUF) buy NSC in the name of any member of the HUF ?

Yes. When a subscripttion to the National Savings Certificates is made in the name of any member of the Hindu Undivided Family out of the HUF's income chargeable to tax and the beneficial ownership of this investment vests in the family, the HUF would be entitled to a deduction under Section 88 with reference to such contribution.

How should the interest accrued on subscripttion to NSC be treated when the subscripttion is made in the name of a person other than the assessee claiming the rebate ?

The interest accrued on the subscripttion would only be given to the person/persons who purchased the NSCs out of their taxable income