NSC Investment - Rs.1,00,000 p.a.

[Kashif.Baig]

I would like to invest Rs.1,00,000 every year in NSC for the next 18 years, (total investment=Rs,18,00,000), starting from April this year. As soon as the first investment matures in 6 years time (April 2016), I want to add the interest earned, add the usual Rs.1,00,000 & re-invest it for the next 6 years.

As an investment in NSC earns 8% p.a. (compounded half-early), after all the 18 investments have matured, I will earn a return of Rs. 49,59,759 (tax free).

I have attached a spreadsheet with the details of the investment. Please let me know your thoughts if this is a good idea.

regards,
Kashif.

 

[munde_77]

I would like to invest Rs.1,00,000 every year in NSC for the next 18 years, (total investment=Rs,18,00,000), starting from April this year. As soon as the first investment matures in 6 years time (April 2016), I want to add the interest earned, add the usual Rs.1,00,000 & re-invest it for the next 6 years.

As an investment in NSC earns 8% p.a. (compounded half-early), after all the 18 investments have matured, I will earn a return of Rs. 49,59,759 (tax free).

I have attached a spreadsheet with the details of the investment. Please let me know your thoughts if this is a good idea.

regards,
Kashif.

Interest earned on NSC is not tax free

Minimum investment Rs. 500/- No maximum limit.
Rate of interest 8% compounded half yearly.
Rs. 1000/- grow to Rs. 1601/- in six years.
Two adults, Individuals, and minor through guardian can purchase.
Companies, Trusts, Societies and any other Institutions not eligible to purchase.
Non-resident Indian/HUF can not purchase.
No pre-mature encashment.
Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5 years under section 80 C of Income Tax Act.
Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum period of two years.
Facility of reinvestment on maturity.
Certificate can be pledged as security against a loan to banks/ Govt. Institutions.
Facility of encashment of certificates through banks.
Certificates are encashable any Post office in India before maturity by way of transfer to desired post office.
Certificates are transferable from one Post office to any Post office.
Certificates are transferable from one person to another person before maturity.
Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced certificate.
Nomination facility available.
Facility of purchase/payment to the holder of Power of attorney.
Tax Saving instrument - Rebate admissible under section 80 C of Income Tax Act.
Interest income is taxable but no TDS
Deposits are exempt from Wealth tax.

 

[Kashif.Baig]

Interest earned on NSC is not tax free

Minimum investment Rs. 500/- No maximum limit.
Rate of interest 8% compounded half yearly.
Rs. 1000/- grow to Rs. 1601/- in six years.
Two adults, Individuals, and minor through guardian can purchase.
Companies, Trusts, Societies and any other Institutions not eligible to purchase.
Non-resident Indian/HUF can not purchase.
No pre-mature encashment.
Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5 years under section 80 C of Income Tax Act.
Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum period of two years.
Facility of reinvestment on maturity.
Certificate can be pledged as security against a loan to banks/ Govt. Institutions.
Facility of encashment of certificates through banks.
Certificates are encashable any Post office in India before maturity by way of transfer to desired post office.
Certificates are transferable from one Post office to any Post office.
Certificates are transferable from one person to another person before maturity.
Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced certificate.
Nomination facility available.
Facility of purchase/payment to the holder of Power of attorney.
Tax Saving instrument - Rebate admissible under section 80 C of Income Tax Act.
Interest income is taxable but no TDS
Deposits are exempt from Wealth tax.

"Interest income is taxable but no TDS" .. so does that mean that at the time of maturity (after 6 years), I will not get Rs. 1,600? I will get Rs. 1,600 - Tax? Even if I intend to re-invest the entire amount of Rs. 1,600?

regards,
Kashif.

 

[praveen taneja]

Interest earned on NSC is not tax free

Minimum investment Rs. 500/- No maximum limit.
Rate of interest 8% compounded half yearly.
Rs. 1000/- grow to Rs. 1601/- in six years.
Two adults, Individuals, and minor through guardian can purchase.
Companies, Trusts, Societies and any other Institutions not eligible to purchase.
Non-resident Indian/HUF can not purchase.
No pre-mature encashment.
Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5 years under section 80 C of Income Tax Act.
Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum period of two years.
Facility of reinvestment on maturity.
Certificate can be pledged as security against a loan to banks/ Govt. Institutions.
Facility of encashment of certificates through banks.
Certificates are encashable any Post office in India before maturity by way of transfer to desired post office.
Certificates are transferable from one Post office to any Post office.
Certificates are transferable from one person to another person before maturity.
Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced certificate.
Nomination facility available.
Facility of purchase/payment to the holder of Power of attorney.
Tax Saving instrument - Rebate admissible under section 80 C of Income Tax Act.
Interest income is taxable but no TDS
Deposits are exempt from Wealth tax.

:clapping::clapping::clapping::clapping:

 

[Kashif.Baig]

:clapping::clapping::clapping::clapping:

sorry but i did'nt get what the clapping is for??

i'm very new to investing and was hoping some of my more knowledgeable folks here would help me out

 

[praveen taneja]

sorry but i did'nt get what the clapping is for??

i'm very new to investing and was hoping some of my more knowledgeable folks here would help me out

clapping is for his hard work and detail knowledge on NSC and his sharing habit for which TJ is known for:thumb:

 

[munde_77]

"Interest income is taxable but no TDS" .. so does that mean that at the time of maturity (after 6 years), I will not get Rs. 1,600? I will get Rs. 1,600 - Tax? Even if I intend to re-invest the entire amount of Rs. 1,600?

regards,
Kashif.

Kashif, U will have to pay incometax if your total income exceeds basic exemption of income tax. U can claim 100000 under 80 c if u deposit again .So if your total income exceeds 160000+100000=2600000/- U will have to pay incometax

PPF returns are tax-exempt but NSC returns are taxable. Interest accrued on NSC is to be included in your total income every year.

However, you’re also entitled to get the deduction under section 80C for the interest accrued on NSCs, because this notional interest is deemed to be reinvested. So, the net effect is that your section 80C limit gets reduced to that extent because otherwise you would have made investment in other tax-saving instruments to the extent of accrued interest on the NSC. If your section 80C limit already stands exhausted, then your post-tax returns from NSC would become 6.48% if you fall in 20.6 per cent tax bracket and 5.64% if your marginal tax rate is 30.9 percent

 

[Kashif.Baig]

Kashif, U will have to pay incometax if your total income exceeds basic exemption of income tax. U can claim 100000 under 80 c if u deposit again .So if your total income exceeds 160000+100000=2600000/- U will have to pay incometax

PPF returns are tax-exempt but NSC returns are taxable. Interest accrued on NSC is to be included in your total income every year.

However, youre also entitled to get the deduction under section 80C for the interest accrued on NSCs, because this notional interest is deemed to be reinvested. So, the net effect is that your section 80C limit gets reduced to that extent because otherwise you would have made investment in other tax-saving instruments to the extent of accrued interest on the NSC. If your section 80C limit already stands exhausted, then your post-tax returns from NSC would become 6.48% if you fall in 20.6 per cent tax bracket and 5.64% if your marginal tax rate is 30.9 percent

Thanks very much for the info. Any idea if the Direct Tax Code will make any changes to the exemption limits under Section 80C? If yes, then I can probably wait & invest after April 2011.

regards,
Kashif.

 

[magnet]

Thanks very much for the info. Any idea if the Direct Tax Code will make any changes to the exemption limits under Section 80C? If yes, then I can probably wait & invest after April 2011.

regards,
Kashif.

Direct tax code says it will extend 80C limit from 1 lakh to 3 lakhs...but all instrument PPF and all will fall under EET regime..Though certain clarification or changes might happened in it like there wont be short term or long term and all instrument will be taxed....So people holding old shares might sell all....So certain clarification remains to come

 

[munde_77]

Direct tax code says it will extend 80C limit from 1 lakh to 3 lakhs...but all instrument PPF and all will fall under EET regime..Though certain clarification or changes might happened in it like there wont be short term or long term and all instrument will be taxed....So people holding old shares might sell all....So certain clarification remains to come

Let us will and see til the Direct Tax Code is implemented