INCOME FROM CLOSING OF NSS -1992 -EXEMPT UNDER WHICH SECTION

The principal that you will receive back when your account is closed is tax free, because any money paid into the NSS has already been deducted when you filed your taxes, using form 80C. However, all of the interest earned is subject to taxation, at "Other Sources Income", unless you have previously reported it for taxation on an accrual basis, then you will not have to pay tax again.

Thus, there are no specific exemptions provided for the withdrawal of the principal from NSS. Only the interest will be subject to taxation.