Tax Treatment of NSCs

National Savings Certificates are a popular way of claiming your Section 80C deductions. Lets take a look at all the tax benefits that arise from investing in NSCs, how is the interest treated and what happens when your NSCs mature.

You can easily invest in NSCs through a designated post office. There is no maximum limit on the amount you can invest in NSCs – though there is a limit on claiming exemption section 80C of Rs 1,50,000. You may choose to claim the entire amount by investing in NSCs.

Note the following regarding NSC investments –

  • Amount Invested – Claim the benefit under section 80C for NSCs in the same financial year you invest money in NSC.
  • Interest on NSCs – Interest that accrues annually on your NSCs is taxable and is shown under Income from Other Sources. This interest is also considered as a reinvestment, therefore, each year this interest qualifies for deduction under Section 80C. In the last year, interest is not to be added to 80C since it is not reinvested. The original investment in the NSC can be claimed only in the year you actually purchased your NSCs and not in any other year.
  • Maturity of NSCs – Since Interest on NSCs is added to income each year – no amount is taxable when the NSC matures and you receive the return from your investment.

We hope this article will help you understand the tax treatment of NSCs, do remember to take full advantage of the benefit under section 80C. Reach out to us if you have any questions and we will be happy to help you!




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