Is the interest earned on NSCs taxed on annual or accrual basis?

The interest from NSC in the final year is not tax deductible as it is not reinvested further.

Query: I have invested in some National Savings Certificates (NSC) that will mature in 2022-23. The entire interest will be paid to me when the NSCs mature. Will I have to pay tax at the time of encashment or annually on accrual basis?

Ans: The interest on NSC is taxable annually on accrual basis. The interest accrued is deemed to be reinvested on behalf of the NSC holder each year and you need to declare this interest income under the head ‘income from other sources’. However, you can claim deduction for this accrued interest under Section 80C of the Income-Tax Act. Please note that the interest from NSC in the final year is not tax deductible as it is not reinvested further.

Query: My wife and I reside in a leased house provided by my employer. Rent to the landlord is paid partially by the employer and partially by me. Can my wife avail of HRA benefits, if she too contributes towards the rent payments?

Ans: Consultancy fee received by you will be taxed under the head ‘income from business and profession’. The income in dollars will have to be converted into rupees at SBI’s dollar buying rate as on 31 March 2018. You can pay tax on presumptive basis under Section 44ADA—50% of total income will be considered taxable. If the foreign company deducts tax before it pays you, you can claim tax credits for the same. You aren’t liable to pay GST as consultancy service to a foreign company is treated as an export, and exports do not come within GST’s purview.