Dear sir, My query is, that the effective rate on NSC is 8% compounded semi annually, that comes out to be 8.16% compounded annualy. if i invest Rs10000, then i get Rs 16,405 at the end of 6yrs. Now do i pay tax on interest accrued ie Rs 6,405 alone or do i pay it on capital ie Rs 10,000 also?
It has been mentioned in the article that the interest on NSC is tax exempt. This is incorrect. The interest was and is taxable. But interest on NSC and also on Bank Deposits was deductible from taxable income under section 80 L to the extent of Rs.12000 per year. This section has been withdrawn last year. Thus the entire amount of interest (both on NSC and on Bank deposits) is now taxable without any deduction.
The essential difference which teh author has missed out is that the NSC interest is deemed to be reinvested under same section and as such will qualify for dedction under section 80 C.
It is unlikely that similar treatment will be offered to Bank deposits. For this one has to wait and watch.
the example of tax calculations you have shown is wrong. the maximum deduction pssible is 100000 as standard deduction and one more lakh in case of men for savings/investment under 80C on incom of rs 320000 one has to pay tax on 320000-200000=120000 so i think theres something wrong in it.
RE:an alternative to NSC
by Anil Harolikar on Mar 16, 2006 02:16 PM
Dear Sir, sorry to disappoint you but since last year )after the limits were raised), there is NO concept of standard deduction. Hence the limit under 80 C of Rs100,000 /- is the only deduction ( apart from 80-D for Mediclaim policies and 80-G for donations). To that extent the tax calulations shown in the article are correct.
I have worked with four IT companies since 2000 ie., almost six years. Recently I resigned from my the last company. All my PF amount is with the 4 companies. If I want to withdraw the PF from each of the company, will there be tax deducted for the PF amount?
FM has advocated that service tax being extended to credit cards too. Does that mean that one will pay 12% service tax on the total monthly expenditure on the card ? For example if i spend Rs 5000 monthly on card on petrol, hose hold goods and utility bills will i pay Rs 600 as service tax? that is Rs 5000+ 600 = Rs 5600 ? This will amount to increase in price of 12% of whatever tranactions i make. Is that so . Will the FM clarify
This budget is not for the salary class. this is for th people who earn more.no limt has increased for the 80c. at least in my opinion after inclusion og FD under this perview this must be gone by 50000 at least
int on nsc is not tax free. u can choose to show as yr income every year on accrual basis or show the difference in issue price and maturity value as yr int income in the yr of redumption. so the statement that proccds of nsc , which includes cumulative int+capital,are tax free on maturity , is not factually corrct. pl clarify. v.s.date.
It was an excellent presentation on tax computation. I am particularly impressed with the explanation with a typical example. I will take a print-out and keep it in my Income Tax File.
