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NSC in post office

NSC in post office

National Savings Certificate (NSC), Public Provident Fund (PPF) and Kisan Vikas Patra(KVP) are the most popular fixed income earning instruments which can be opened with a Post Office and also help in saving tax under Section 80C. In this article, we would be focusing on National Savings Certificate (NSC), its Interest Rate, Maturity Period etc.

National Savings Certificate Scheme

National Savings Certificate Scheme is a scheme launched by the govt to promote the habit of savings amongst the common man and to channelize these savings in the right direction for the benefit of the whole country. Under this scheme, deposits are accepted by the govt through Post Offices and the amount generated through these deposits is used for the growth of the country.

To encourage the taxpayer to invest in this scheme, the govt has allowed this Investment in National Savings Certificate (NSC) to be claimed as a tax deduction under Section 80C which helps the tax payer in reducing his tax burden.

National Savings Certificate Interest Rate

The Interest Rate on National Savings Certificate is almost at par with the Interest Rates on other Fixed Income earning Instruments like PPF, Tax Saving Fixed Deposit etc. The Interest Rate on NSC  is compounded half yearly and is announced by the Govt every year before 1st April and they keep on changing every year.

There are 2 issues of National Savings Certificate (NSC) currently in operation and the Interest Rate on these National Savings Certificate is as follows:-

ParticularsNSC (VIII Issue)NSC (IX Issue)
Maturity Period*5 year10 year
NSC Interest Rate (wef 1st April 2013)8.5%8.8%

*Earlier the smaller duration issues were of 6 years but from 1st December 2011, this has been reduced to 5 years.

Interest on National Savings Certificate (NSC) is liable to tax as per the Income Tax Slabs of the Individual. However, no TDS is deducted on such interest but such interest shall be reflected in the Income Tax Return of the Individual.

Although this Interest on National Savings Certificate is taxable, this Interest is not paid to the account holder but is reinvested in NSC. As this Interest is re-invested in National Savings Certificate which is a specified instrument u/s 80C, a taxpayer can claim this amount of interest as a tax deduction under Section 80C.

So, the taxpayer will first have to show this interest earned as an income and then claim this as a deduction under Section 80C. The total maximum deduction that can be claimed u/s 80C is Rs. 1,50,000 only.

NSC in post office

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