Interest on NSC is Tax-free & 80C!

Hi Team…

Can somebody clarify on this: Is the interest earned on NSC tax free? If not, how do I claim it?


Deposits up to Rs. 1.50 lakh in NSC qualify for Deduction Section 80C of the Income Tax Act actually and even accrued interest on NSC also qualifies for deduction u/s. 80C.

NSC interest is taxable, as I’m aware.

Only the final year’s interest, when the NSC matures, does not receive a tax deduction as it does not get reinvested but is paid back to the investor along with the interest of the earlier years and the capital amount.


No, the interest earned on National Savings Certificate (NSC) is NOT tax-free. The interest is fully taxable. Although this interest can be claimed as a deduction under Section 80C for all the years (except the last year), you must make it a point to mention this income as ‘income from other sources’ to get the benefits of Section 80C. Otherwise, you may have to end up paying taxes for it.

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