Deduction under section 80C of the Income-tax Act, 1961, in respect of contributions made to National Savings Certificates VI & VII Issues - Income Tax - 405/1985

Deduction under section 80C of the Income-tax Act, 1961, in respect of contributions made to National Savings Certificates VI VII Issues Circular No. 405 Dated 15/1/1985 Under section 80C(2)(h) of the Income-tax Act, 1961, an individual or Hindu undivided family or an association of persons or a body of individuals consisting only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu is entitled to a deduction in respect of any sums paid in a previous year out of his or its income chargeable to tax, as subscription to any such security of the Central Government as may be specified in the Official Gazette. National Savings Certificates VI and VII Issues have been specified as securities for the purposes of section 80C(2)(h) and the notification has come into force from April 2, 1983. 2. The following clarifications are issued in this connection:- (i) Whether income-tax exemption under section 80C can be claimed by first named person in case of joint holding of National Savings Certificates VI Issue/VII Issue? The deduction under section 80C of the Income-tax Act, 1961, can be claimed by the person who has contributed the monies out of his income chargeable to tax. It can be claimed by the first named person in a joint holding if the first named person has so contributed the amount. (ii) Whether rebate of income-tax under section 80C will be available where (a) National Savings Certificates VI Issue/VII Issue are purchased in the name of spouse and minor children, and (b) jointly by husband and wife? The answer to question (i) will apply also here. The deduction under section 80C is to be given to the person who has purchased the National Savings Certificate out of his income chargeable to tax. (iii) Whether the interest accruing to the National Savings Certificates would be included in the hands of individual or in the case of person(s) in whose name(s) the subscription has been made? The interest accruing on the subscription to the National Savings Certificates will be included in the hands of the person who has subscribed from his income chargeable to tax. (iv) Since the interest on 6-Year National Savings Certificates VI issue is deemed to have been reinvested, whether the holder of the National Savings Certificates VI Issue is entitled to claim benefit of section 80C on this reinvested interest? (rules 19 and 28 of the National Savings Certificates VII Issue Rules, 1981). The amount of interest reinvested will satisfy the test of having been paid out of income chargeable to tax to get the National Savings Certificate and so will be entitled to deduction under section 80C. (v) Whether a karta of an HUF can buy National Savings Certificates in the name of any member of the HUF? Where subscription to the National Savings Certificates in the name of any member of the HUF is shown by the family to have been made out of the income chargeable to tax and the beneficial ownership in such certificates vests in the family, the family would be entitled to a deduction under s. 80C with reference to such contribution. (vi) Whether the interest accrued on the subscription would be included in the hands of the individual or in the hands of the person in whose name the subscription has been made? The interest accrued would be included in the hands of the persons who purchased the National Savings Certificate out of their income chargeable to tax. (Sd.) R.K. Tewari Under Secretary Central Board of Direct Taxes.