Tax Benefits of NSC investment
Although there is no upper limit on the purchase of National Savings Certificates, investments only of up to ₹1.5 lakh per year qualify the subscriber for tax benefits under Section 80c of the Income Tax Act of 1961.
In addition, the interest earned on NSCs for the first four years is presumed to be reinvested (i.e. adding again to the primary investment) and is therefore eligible for a tax deduction, subject to an annual cap of ₹1.5 lakh. The interest that is earned in the fifth year, however, is not reinvested and is therefore taxable at the investor’s applicable slab rate.
For the first quarter of 2023, the current NSC interest rate is 7.7%.
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