3 Replies to “is interest on NSC allowed for deduction under chapter VI A?”

  1. In respect of interest earned on NSCs deduction IS allowed under chapter VI of the I T Act, because this amount is deemed to be re invested in NSC itself. There is a particular table available as to the interest to be considered as reinvested from 2nd year onwards except in the year of maturity. Please consult this for calculating the eligible amount..


  2. Yes interest on NSC is allowed for deduction under chapter VI A. But before claiming deduction under said chapter it must be ensure that said NSC interest is included in Income from Other Sources also.


  3. Tax Implications of investment in N.S.C.s:

    •The capital investment in N.S.C.s qualifies for rebate u/s 80C in the first year of investment.
    •Thereafter (after completion of one year) for the next 5 years the annually accrued interest on N.S.C.s is eligible for rebate u/s 80C as it is considered reinvested in N.S.C.s
    •Also this annually accrued interest is taxable on an accrual basis every year under the head Income from Other Sources.
    •If the accrued interest is not taxed every year on an accrual basis than the entire income becomes taxable during maturity / withdrawal.

    HMT





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