National Savings Certificate
NSC (National Savings Certificate) is issued through Post Offices; they are the nodal agency which makes it available to the common public.
There is no Limit for Investment in NSC.
Deposits up to Rs. 1.50 lakhs in NSC qualify for deduction under section 80C of the Income Tax Act 1961. Accrued interest on NSC also qualifies for deduction under section 80C of the Income Tax Act 1961
NSC interest is taxable. However, as it is a cumulative scheme ,interest is not paid to the investor but instead accumulates in the account, each year’s interest is considered reinvested in the NSC.
Since it is deemed reinvested, it qualifies for a fresh deduction under section 80C of the Income Tax Act 1961,thereby making it tax-free. When the NSC matures, tax deduction is not received as it does not get reinvested, but is paid back to the investor along with the interest of the earlier years and the capital amount.
To benefit from this feature of reinvested interest and its deduction, it is important to declare the accrued interest on NSC on a yearly basis in your tax return under the head “Income from Other Sources”. Under deductions, you will claim accrued interest for all the years except the last year under section 80C of the Income Tax Act 1961as reinvested NSC interest. Both cancel each other out, making the interest in effect tax-free.
Non-Resident Indians are not eligible to purchase the National Savings Certificates.
National Savings Certificates (NSC) are certificates issued by Department of the post, Government of India and are available at most post offices in the country. This Certificate can be transferred from a post office where it is registered to any other post office and it can be pledged as a security.
Features of NSC
- Scheme specially designed for Government employees, businessmen and other salaried classes who are Income Tax assesses.
- No maximum limit for investment.
- No Tax deduction at source.
- Investment up to INR 150000/- per annum qualifies for IT Rebate under section 80C of Income Tax Act 1961.
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