National Savings Certificates (NSC) interest declaration: What income tax rule says while ITR filing — explained

• April 19, 2023
• CA Chandan Agarwal's Office

ITR filing: As per Section 145 of the Income Tax Act, all the taxpayers having any taxable income under the head “Profits and Gains of Business & Profession” and “Income from other sources” have option to offer the same either on accrual basis or on receipt basis

We have not declared interest on National Savings Certificates (NSC) in the first year and neither claimed it under Section 80C. Can we start doing this from the 2nd year on wards i.e declaring 2nd year interest on NSC and claiming it under Section 80C? Supposing we declare the interest every year but post office declares the lump sum interest for 5 years in the last year in AIS/TIS under SFT section, will it not become double declaration for us? Because our interest income in ITR should match with AIS and if we show only 5th year interest then IT might send mismatch notices. Please guide and clarify both these points. My income is not in taxable so no tax liability.

Answer: As per Section 145 of the Income Tax Act, all the taxpayers having any taxable income under the head “Profits and Gains of Business & Profession” and “Income from other sources” have option to offer the same either on accrual basis or on receipt basis. The same needs to be done consistently year after year. Either you can declare all the interest income on accrual basis or on receipt basis. You cannot show some interest on accrual basis and some on receipt basis.

So, the answer to your question would depend on how you have been offering other interest income year after year in the past. If you have shown it on accrual basis, you can start offering the interest income from NSC from second year onward on accrual basis and claim the 80C deduction. Since you cannot revise your old ITR, you will also have to offer the first year interest also along with second year interest. However, deduction under Section 80C would be available only for the second year interest in my opinion. Please note no deduction under Section 80C is available in respect of interest for the firth year.

As far as your question on AIS is concerned, you need not worry. You do not need to add the interest for earlier year already accounted for in the ITR for the last year even if the post office shows the aggregate interest for all five years in the last year. You can always explain that though the post office has shown lump sum interest for all the years in one year, you have been offering it year after year.

Source: https://www.livemint.com/money/personal-finance/national-savings-certificates-nsc-interest-declaration-what-income-tax-rule-says-while-itr-filing-explained-11681808084826.html