Income Tax Treatment for NSS

Dear Sir,

https://www.thehindu.com/2007/07/30/stories/2007073054381600.htm

NSS 1987 and 1992 are different

I have two accounts under National Saving Schemes. One started in 1987 and another one in 1992. There are balances in both the accounts. I would like to close them. What is the tax treatment of the amount of the principal and the interest to be received on such closure.

National Savings Scheme, 1987, was covered by Sec. 80CCB, which allowed the contribution as deduction from taxable income subject to the amount of both principal and interest being taxable on withdrawal. This scheme was closed with effect from April 1, 1992.

National Savings Scheme, 1992, allows deduction for the contribution made for this purpose under Sec. 80C subject to the ceiling under Sec. 80C with interest income being taxable, while the principal amount on return will not be so taxable.

Interest under this scheme can be offered either on accrual basis from year to year or on cash basis in the year of withdrawal.

Dear Jignesh

There is a circular on this aspect but right now I am not having the reference no. It stated that redemption proceeds of national saving scheme received by the nominee after death of the account holder is not taxable in the hands of the Nominee.

The Post office staff where the said investment has been made would guide you in this respect.