Investment in NSCs for tax deductions

NSCs are one of the safest tax saving investments available to the investors with assured returns and tax benefits. These certificates are issued at all Post Offices. NSCs are available in two series with effect from 01.04.2012 viz. NSC VIII issue and NSC IX issue.

Income Tax deductions

Investment of Rs.1.50 lakh in the 5 years NSC (NSC VIII issue) qualify for Deduction Section 80C of the Income Tax Act.However, there is no maximum limit for investment. No Tax deduction at source. Hence, the NSC holders who may not have a taxable income need not have to file their tax returns to get back the TDS. Redemption proceeds are not added to the taxable income. Further, the advantage in buying 5 years NSCs is that the accrued interest on NSCs purchased previously years are eligible for tax rebate. However, you have to remember that the interest received on NSCs is to be taken into account for computation of taxable income.

National Saving Certificates (NSCs) are issued at all Post offices in India. The interest on NSC is linked to the bond yield that guarantees the returns on investments in line with the prevailing market rates.  However, there is some bad news to investors that the interest on NSCs is calculated on annual rest which will actually reduce the quantum of interest payable on money invested compared to the earlier system. Further, with effect from April 2016, the interest rate on small savings schemes including NSCs notified on the quarterly basis instead of the earlier system of announcing for every year. The Government has announced interest at 6.80% p.a for the present quarter April 2021 to June 2021. To find out the latest interest rate click Interest rates of small savings investments

Highlights of NSCs

• No tax deduction at source for interest received. Interest income should be shown in your tax return and tax if any on that should be paid.
• Bank loans can be easily availed by pledging the NSCs as security for the loan.
• An Investor can safely recycle his investments in NSCs on maturity [Five years (NSC VIII issue) and claim tax benefits on the reinvested amount.
• There is no compulsion to continue investments in NSCs in subsequent years.
• Trust and HUF cannot invest in NSC.
• Certificates can be transferred from one Post Office to another.
• A Certificate can be transferred to another person only once.
• A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor
• Non-Resident Indians are not eligible to purchase the National Savings Certificates: Provided that if a resident who subsequently becomes Non-Resident Indian during the currency of maturity period, shall be allowed to avail the benefits of the certificates on maturity on a Non-Repatriation Basis.
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