Tax on NSC interest is paid on accrual basis

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: Went through your Article on FDs & FMPs.(good informative article) I wanted to know if there is any kind of FMPs which give you 80 cc benefit. For example we have FDs for a lock in period of 5 years & we get 80 cc benefit. Are there any such FMPs, and if yes, then I would like to know about it. One more query is that, I am looking towards investing in ELSS Fund for tax purpose. I want to know the tax treatment on the gains or profits made out of it. Also the tax treatment on FDs which are invested for over 5 years that is 80 C.

—Deepak

FMPs do not offer 80 cc benefit. The same is offered only by ELSS funds. About taxation of ELSS funds, there is a three year lock-in. So whenever you sell, the gain will be necessarily long-term in nature. As the tax policy stands now, long-term gains are tax-free.

If I take a loan for the repair and renovation of my father's house, will I be able to get the tax benefits from the loan?

—Prashant

U/s 24 up to Rs 1.5 lakh of the interest paid on a loan for buying, constructing or repairing a self-occupied residential house can be deducted from an individual's taxable income in a year. Similarly, u/s 80C, within the overall limit of Rs 1 lakh repayment of capital of housing loan taken from specified sources is eligible for deduction. However, both these deductions are available only to the registered owner of the property. Since you are not the owner, you will not be eligible to claim the benefit. Moreover, most importantly, you may not be entitled to a loan.

I invested Rs 50,000 in National Savings Certificate (NSCs) in 2001. It matured in February 2007. How much tax do I have to pay on the interest gained? The total maturity value is Rs 95,060.

—Kamdar

The tax on NSC interest is required to be paid on accrual basis. Only then you can claim the benefit of the Sec 88 up to FY04-05 and Sec 80C thereafter. Similarly, the benefit of deduction u/s 80L could be claimed up to FY04-05. This section was also discontinued thereafter.