Amount reinvested after maturity of NSC is not taxable

— Amitav Kumar

Individual term plans are generally issued to a single life assured. However, some plans like HDFC Term Assurance Plans are issued either in single or joint names (first claim). The maximum age for entry and coverage varies across companies. For some companies, the upper maximum entry age is 65 years and the maximum upper age for policy coverage is 75.

If I reinvest the entire amount of NSC (principal and interest earned) in NSC for another five years, do I still have to pay tax on the interest earned after the maturity of the first NSC?

— Gurdeep Singh

Interest income from NSC investment is taxable. The annual accrued interest is not paid to the investor, but, instead, gets accumulated in the account itself. So, each year's interest for the first five years is considered reinvested. Since it is deemed reinvested, it qualifies for a fresh deduction under Section 80C, thereby making it tax-free. The interest so earned is added in ‘other income’ and treated as part of deduction under Sec 80C.Only the sixth year’s interest, when the NSC matures, does not receive a tax deduction as it doesn’t get reinvested. The reinvested amount after maturity is not taxable.

Of Ulip, NPS and PPF, which is the best option for long-term investment ?

— Dinesh Sharma

The appropriateness of a category depends

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