NSC Enquiry

POSTED BY santuu santu ON April 29, 2013 11:59 am COMMENTS (14)

I have enquired in PO regarding NSC and the person working there told me to do 5Yrs NSC instead of 10YR. The cause he told me that in case of 5YRs NSC the Matured amount amount would be total TAX free. In case of 10Yrs one it would be taxable..Is that True? 

If 5YRs also taxable then how it would be calculated…. Suppose my amount is 10k


14 replies on this article “NSC Enquiry”

  1. Dear Santuu, the accrued interest in each FY is available for tax benefit under section 80C within the overall limit of 1L Rs. but at the same time, this interest ‘ll be added into your taxable income & you w’d have to pay more tax on this interest. So NSC is not a good tax saving vehicle.



  2. santuu santu says:


    As per the list only PPF I will put to fill up the 80C bracket. As FFC said to keep PPF for 80C and paying tax for NSC interest then what to do ? Not showing NSC interest in 80C bracket and pay tax if any applicable?

  3. Dear Santuu, My personal take ‘ll be to count your 1L limit this way –

    PF (if any)
    Life Insurance Prem.
    Kids’ education expenses (if applicable to you)
    Home loan repayment (If applicable to you)
    PPF – as per your own comfort level

    Now do tell me for any short fall if there. Please fill this short fall by investing in Tax Saver funds.



  4. santuu santu says:

    Thanx Ashal….

    I want to do that by PPF only as that return would be Tax exempted.

  5. Dear Santuu, with all due respect to KBC & Mr. Sr. Bachchan, “Koi Bhi Sawaal Chhota Nahin Hota.”

    So in the same sense, no question asked by you people are silly. Coming back to your own situation, In want to know, how you are planning to fulfill your 1L Rs. section 80C limit? I.e. your PF, PPF, Life Insurance prem……..?



  6. santuu santu says:

    Hi Ashal,

    Because there is very less risk involved. Dont have much idea about investing. After joining this forum already dropped the thinking of opening many LICs. Now seeking NSC things to get knowledgeable. Quite funny, I understand…….But most of us really afraid of loosing savings….

    But I am sure, by my exp, this forum will help me in every financial planning irrespective of how much silly that is. Thanx to the Team………

  7. santuu santu says:

    Thanx FFC….

    As per the Calculator in the webpage you given the first year accured Interest is 800 and odd.
    If I pay 1L in PPF and pay interest on this 800 or adjust this with any other then is that possible??

    If possible then the tax burden at the end of the 5YR tenure would be less. What is your opinion?

    1. Suggest you keep it simple.

      Use PPF for 80C and declare the NSC interest for tax.

  8. Dear Santuu, May i know, why are you so much interested in NSC?



  9. santuu santu says:

    Thanx again.

    But how would I know the exact amount of Interest I would receive in next FY??

    At the end of 5yrs tenure If I receive 15K (10K+5K total Interest) then how much would be taxable ?? Full 15K or Only 5K , which is the interest and not reinvested ??

    1. The full interest received is taxable.

      what I wrote above: “If you invest 10K in Jan 2013 … is NOT correct. Please read the link I had mentioned above It says:
      NSC interest is taxable. However, as it is a cumulative scheme (e.g. interest is not paid to the investor but instead accumulates in the account), each year’s interest for the first 5 years is considered reinvested in the NSC. Since it is deemed reinvested, it qualifies for a fresh deduction under Sec 80C, thereby making it tax-free. Only the final year’s interest, when the NSC matures, does not receive a tax deduction 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.

      What you must ensure while filing tax return

      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 first five years under Sec 80C as reinvested NSC interest. Both cancel each other out, making the interest in effect tax-free.
      sorry I had understood it wrong. Hope the above is clear.

      Only accrued interest can be claimed for 80C not the original amt.

      You will need to calculate the accured interest

      Use this

  10. santuu santu says:

    First of all Thank you very much. As you understand I am new in this arena so another question took place in my mind.

    In 2012-13 FY, In JAN, I have opened 10K NSC and suppose in First Year It will earn 1k Interest, which would get reinvested in next FY, JAN 13, then how much I may Invest in 80C to fulfil 1L quota in 2013-14FY?

    1. If you invest 10K in Jan 2013

      At 8% pa it will earn about 200 until Mar 31st.

      For FY Apr 2013- Mar 2014 you can claim deduction of 10200 from NSC and remaining 89800 from other instruments

      In FY 2013-14 you would have got an interest of about 816.
      So in next FY your NSC deduction will be 10200+816 and so on

  11. Not exactly true
    NSC is a cumulative scheme. The interest gets reinvested. If the initial amt + reinvestment falls below 80C limit taking into account all your other 80C deductions then and only then and until then it is tax free

    Once it crosses 80C limit and once it matures (5yrs or 10yrs) it is always taxable


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