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NSC vs KVP

ANSHUL GUPTA (ARTICLE) (51 Points)

15 January 2018

I want to do investment for tax saving u/s 80C.

plz suggest which one is better, NSC or KVP??

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160870 Points)
Replied 15 January 2018

NSC

Five reasons to invest in NSC:

Save income tax up to Rs 1.5 lakh
Guaranteed interest of 7.8.% per annum
Maturity period of only 5 years
Easily available at all post offices
Interest is compounded and reinvested by default

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ANSHUL GUPTA (ARTICLE) (51 Points)
Replied 16 January 2018

isn't it 7.6% ??

also the interest earned is taxable as far as I know....how to save that??

and if I gift my NSC to someone....then is it taxable for the other person?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160870 Points)
Replied 16 January 2018

Yes, agreed......

The government has cut interest rates on small savings schemes, including NSC and PPF for January to March 2018, the interest rates on these schemes have been reduced to 7.6%..

Though interest is taxable, but advantage is it gets reinvested to get 80C benefit (within limit of 1.50 L), so net effect is.... it does not get taxed.

You cannot get tax benefit in case of gift...... So, better to gift redemption amount.

ANSHUL GUPTA (ARTICLE) (51 Points)
Replied 16 January 2018

if I purchase NSC of Rs 1 lakh, then it will fetch me 7600 at the end of year 1, which will be reinvested.

so 1,50,000 - 7,600 = 142400
is this the amount I am eligible to save u/s 80 C in the next year?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160870 Points)
Replied 16 January 2018

As of today maximum eligibility for exemption under sec 80C is 1.50 lakhs, whatever amount you invest............ so the cap is on exemption claim, not on investment part.

(N.B.: May be the limit get enchanced by next budget, on 1st Feb.)