Interest on the NSC?

[jkdas]

I have bought NSC for Rs.10000/-in the Year 2009. Just wanted to know do I need to pay tax on interest on the above NSC in that FY 2009-10.

[tigershark]

I have bought NSC for Rs.10000/-in the Year 2009. Just wanted to know do I need to pay tax on interest on the above NSC in that FY 2009-10.NSC Interest is taxable. But you can claim deduction of the same, under Sec 80C, only if interest in reinvested. NSC is for 6 years. You can't withdraw interest in middle.

[CA_Amit]

NSC interest is first included in computing income under the head "Income from other sources" and then deduction of same is allowed under Sec 80C, as it is deemed as reinvested except for last year (6th year).

[jkdas]

If I withdraw the NSC before completion of six year than what about withdrawn interest?

[CA_Amit]

If I withdraw the NSC before completion of six year than what about withdrawn interest? You can withdraw (in the middle of six year) the interest of NSC, only in very rare circumstances. You normally withdraw it on maturity. And at that time full interest is not taxable. Only last year interest is taxable. Because previous years interests, is already reinvested. So only the 6th year interest which is not reinvest is taxed on the year of receipt.