When I redeem my NSCs on maturity do I pay any income tax on the principal redeemed? (I know there is no tax o
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No there is no tax on redemption of principal amount of nsc ,but if have not taken the interest in your income on the accrual basic than you have add interest amount in your income.
1. The capital investment in N.S.C.s qualifies for rebate u/s 80C in the first year of investment.
2. Thereafter (after completion of one year) for the next 5 years the annually accrued interest on N.S.C.s is eligible for rebate u/s 80C as it is considered reinvested in N.S.C.s
3. Also this annually accrued interest is taxable on an accrual basis every year under the head Income from Other Sources.
4. If the accrued interest is not taxed every year on an accrual basis than the entire income becomes taxable during maturity / withdrawal.
Understand the terms & u shall clarify urself on allsuch related points..
'tax exeption' is different from 'rax rebate'. Nsc is only admissible for rebate, whether it's interest or capital.
u have already paid tax on amount invested (b coz it 's only rebatable) so, at the time of redemption, ur liability is limited to interest earned in the 6th year(formula available in tax ready-reckoner) which is also rebatable.
no income tax on principal. tax on interest income only.
Nope its totally tax free.. enzoy!