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Treatment of interest on NSC

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Udit Gupta

11 Points Posted on 30 May 2021

I purchased NSC worth Rs 3.5 lakh on 18/06/2020. I will claim rs. 1.5 lakh u/s 80C in F/Y 20-21.
How should I treat the interest thereon? In which f/y should I claim the interest on NSC u/s 80C for the first time as the interest is treated to be reinvested in the same section?
Should I have to calculate the interest from 18June 20 - 31 March 21? If I do so then interest will be bifurcated into 6 financial years instead of 5 years. Pls tell me how to treat it.

Replies (3)

Quick Summary

This discussion clarifies the tax treatment of interest earned on National Savings Certificates (NSC). It explains that while the interest is taxable under Income from Other Sources (IFOS), it can also be claimed as a deduction under Section 80C in the year of reinvestment, subject to the overall limit. The advice covers how to calculate interest for the first financial year and clarifies the tax and deduction implications for subsequent years, including the final year of the NSC's term.

CMA Poornima Madhava

CMA

13117 Points Posted on 31 May 2021

1) Deduction up to Rs.1.5 lac can be claimed in FY20-21.

2) Interest for the year 20-21 will be taxable under IFOS

3) Yearly interest thereafter except for last year: Interest income taxable u/s IFOS and deduction available u/s 80C subject to the limit of Rs.1.5 lacs

4) For last year, interest is taxable u/s IFOS but no deduction u/s 80C