ITR 2025: I declare NSC interest yearly, what if AIS shows it as lump sum in last year? Can I get income tax notice?

NSC interest declaration-accrual or receipt basis?

Managing interest income from National Savings Certificates (NSC) can get tricky, especially around when and how to declare it for tax purposes. Today's Ask Wallet-wise query tackles what to do if you skip claiming interest in the first year and face a mismatch with what the post office reports in your AIS at maturity.

Moneycontrol’s Ask Wallet-wise initiative offers expert advice on matters related to personal finance and money-related queries. You can email your queries to askwalletwise@nw18.com and we will try and get a top financial expert to address your queries.

We have not declared the interest on National Savings Certificates (NSC) in the first year and neither claimed a deduction for it under Section 80C. Can we start doing this from the second year onwards. Supposing we declare the interest every year, but the post office reports the lump-sum interest for all five years in the last year in the Annual Information Statement (AIS) under the Specified Financial Transactions (SFT) section, will this not result in double declaration for us? Please guide and clarify both these points. My income is not taxable, so there is no tax liability.

Expert Advice: As per Section 145 of the Income Tax Act, all taxpayers having any income taxable under the head “Profits and Gains of Business & Profession” and “Income from other sources” have the option to offer the same either on an accrual basis (popularly known as the mercantile basis) or on a receipt basis (called the cash basis of accounting).

The method of accounting once chosen must be followed consistently year after year. You can either declare all the interest income on an accrual basis or on a receipt basis. You cannot show some interest on an accrual basis and some on a receipt basis. So, the answer to your question would depend on how you have been offering your interest income year after year in the past. If you have shown it on an accrual basis, you can start offering the interest income from NSC from the second year onward on an accrual basis and claim the Section 80C deduction.

Since you cannot revise your old ITR now, you should offer the first year’s accrued interest on NSC along with the second year’s interest. Please note that no deduction under Section 80C is available in respect of the interest for the year of maturity of the NSCs.

As far as your question on AIS is concerned, you need not worry. You do not need to add the interest for earlier years already accounted for in the ITR for the last year, even if the post office reports the aggregate interest for all years in the last year. In case any notice is received for a mismatch, you can always explain that, though the post office has shown the lump-sum interest on NSC for all the years in the year of maturity/payment, you have been offering it year after year.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.