Is NSC Maturity Amount Taxable or Tax-Free? Know Before You Invest

The National Savings Certificate (NSC) is a popular government-backed scheme that offers reliable savings and fixed returns. Other than that, it also offers tax-saving benefits, which might be desirable to many.

But, when the certificate matures, many investors get confused and ask, “Is NSC maturity amount taxable?” Let’s decode this.

Is NSC Maturity Amount Taxable?

The short answer to this commonly asked question is, partly, yes. The original amount you invested is not taxed again. However, the interest earned on that amount is taxable as per your income tax slab as it is counted in your income earned.

So, when people ask, “Is the NSC maturity amount taxable?” The answer is that tax is levied on the interest, not your invested money.

How is NSC Taxed?

There is a lot of confusion around the tax benefits of NSC because you receive tax benefits in two ways:

• Your investment is eligible for deduction under Section 80C within limits.
• The interest earned every year is added to the investment amount and can also be claimed under Section 80C.

Because of this, many people think the maturity amount is completely tax-free, but that is not true.

Do You Have to Pay Tax Only at Maturity?

Technically, no. This is because the interest is calculated every year and it should be shown as income every year in your Income Tax Return (ITR).

At the same time, you can claim deduction on it under Section 80C. But, most people simply report the total interest when the NSC matures.

Is TDS Deducted on NSC Maturity Amount?

No, there is usually no TDS deducted by the post office or bank on NSC maturity amount. But, you still need to declare the interest while filing your income tax return yearly.

So, even if no tax is deducted, the NSC maturity amount is taxable due to the interest earned.

Takeaways

So, is the NSC maturity amount taxable? The amount you initially invest is not taxed again, but the interest earned on it is taxable based on your income tax slab. 

While the NSC provides tax benefits under Section 80C during the investment period, the maturity amount is not completely tax-free.