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Should I pay tax on NSC interest at maturity or yearly?

Mihir Tanna |1069 Answers |Ask -Follow

Tax Expert - Answered on Dec 17, 2024

Mihir Ashok Tanna, who works with a well-known chartered accountancy firm in Mumbai, has more than 15 years of experience in direct taxation.
He handles various kinds of matters related to direct tax such as PAN/ TAN application; compliance including ITR, TDS return filing; issuance/ filing of statutory forms like Form 15CB, Form 61A, etc; application u/s 10(46); application for condonation of delay; application for lower/ nil TDS certificate; transfer pricing and study report; advisory/ opinion on direct tax matters; handling various income-tax notices; compounding application on show cause for TDS default; verification of books for TDS/ TCS/ equalisation levy compliance; application for pending income-tax demand and refund; charitable trust taxation and compliance; income-tax scrutiny and CIT(A) for all types of taxpayers including individuals, firms, LLPs, corporates, trusts, non-resident individuals and companies.
He regularly represents clients before the income tax authorities including the commissioner of income tax (appeal).... more

Question by Saurabh on Jul 13, 2024Hindi

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Sir, My NSC interest is reflecting in AIS. I am going to fill return as per new tax regime. May I pay tax on NSC interest at maturity or its mandatory to pay tax every year on accrued interest? If I can pay tax at maturity then how to treat AIS report?

Ans: Income from other sources can be offered to tax in accordance with either cash or mercantile system of accounting regularly employed. So you can offer it on maturity but practically it is difficult to manage AIS report.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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Mihir Tanna |1069 Answers |Ask -Follow

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Asked by Anonymous - Jun 19, 2024Hindi

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Hi Mihir, Being in new tax regime, is it OK to pay tax on NSC interest on maturity/ en-cashment/ receipt ? or is it necessary to pay tax on NSC interest every year on accrual basis ? Last year I paid tax on NSC interest on maturity/ receipt. This year FY2023-2024, AIS shows NSC interest on accrual basis.

Ans: Interest income on NSC is taxable as Income from other sources. Taxpayer can offer all the income from other sources on receipt basis and once said method is adopted, it should be followed in future year also.

However, practically it will be difficult to reconcile with AIS and 26AS every year.

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Question by Krishna - Jun 23, 2024Hindi

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Hi Mihir, Being in new tax regime, is it OK to pay tax on NSC interest on maturity/ en-cashment/ receipt ? or is it necessary to pay tax on NSC interest every year on accrual basis ? Last year I paid tax on NSC interest on maturity/ receipt. This year FY2023-2024, AIS shows NSC interest on accrual basis.

Ans: You can show income from other sources on cash system accounting. However, you have to all income under other sources as per cash system and once stand is taken, you have to offer income from other sources as per cash system in future also.

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Asked by Anonymous - Jul 17, 2024Hindi

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I have not shown interest accrued on NSC in the past filed income tax returns.this year ais is showing maturity value and interest on NSC.Should I pay tax on whole amount or just final year interest.thanks

Ans: Since you have not declared interest on NSCs in your filed ITRs, you need to declare full interest of NSC (not of final year only) & pay Tax accordingly.
Most welcome for any further clarifications. Thanks.

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Question by Isha - Jul 18, 2024Hindi

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Hi, I did NSC in 2021 and maturity is after 5 years i.e. 2026. But in FY 23-24 AIS, interest accrued of it is shown. Why do I see interest amount in AIS before maturity of NSC. Is it taxable before maturity?

Ans: Every year interest accumulates and you will need to show that income in your income tax returns every year and pay necessary taxes.

Please consult your CA before moving ahead.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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