Declaration of NSC interest & EPF withdrawal amount in ITR

Query 1: NSC Interest Declaration

1. Requirement of yearly declaration

• Tax rule: NSC interest accrues annually and is deemed reinvested (except in the final year).

• Each year’s accrued interest:

  • Should ideally be declared under “Income from Other Sources”, and

  • Claimed as deduction under Section 80C (since it’s reinvested).

• If your 80C limit was already fully utilised, you couldn’t claim deduction, but the interest still should have been reported as taxable income in earlier ITRs.

So yes, technically you were required to declare the yearly accrued interest in each earlier ITR.

2. Final year’s interest

• In the final year (maturity year), the accrued interest is not reinvested, hence it is only taxable.

• Since your NSC purchased in April 2019 matured in April 2025, the last year’s interest relates to FY 2024-25 (AY 2025-26).
  You did the correct thing by declaring it in AY 2025-26.

3. Remedy

• Since earlier years’ accrued interest was not declared, the technical position is that there is a mismatch with law.

• Practical remedy:

  • You can leave it as is, because after maturity, the entire interest has anyway been offered to tax (in AY 2025-26 through AIS reporting).

  • If tax department raises a query, you can explain that you taxed the entire maturity interest in the final year, which ensures no revenue loss to the government.

  • No rectification/revised returns are possible now.

  • Hence, best approach is to keep supporting documents ready and respond if a notice comes.

Query 2: EPF Withdrawal Declaration

1. Taxability

• Since you had 10 years of continuous service, your EPF withdrawal in Jan 2024 is fully exempt under Section 10(12).

• However, disclosure in ITR is still advisable — in the “Exempt Income” schedule.

2. Was it required in AY 2024-25?

Yes.

• Even though exempt, you should have reported it under “Exempt Income – Others” in AY 2024-25.

• Since you didn’t, your ITR shows lower exempt income, which might create a mismatch with AIS (especially because of the linked credit card repayments flagged as high-value).

3. Impact of not reporting

• The tax department may question source of funds for your high-value repayments (seen in AIS).

4. Remedy

• For AY 2024-25, the ITR revision window has closed.

• Best option:

  • Keep withdrawal proof ready (Form 10C/19 acknowledgement, EPFO passbook, bank credit entry).

  • If CPC/AO asks, explain that the repayments were funded from your exempt EPF withdrawal.

  • No additional tax liability will arise.

• NSC Interest – Should ideally be declared each year, but declaring full final-year interest in AY 2025–26 (as you did) is acceptable. No revenue loss, keep NSC proof ready.

• EPF Withdrawal – Fully exempt after 10 years service, but should have been shown in AY 2024–25 under “Exempt Income.” Keep EPF withdrawal documents to justify source of funds if asked.

• Gratuity (₹7.45L) – Fully exempt u/s 10(10), but should also have been shown in AY 2024–25 under “Exempt Income.” Keep gratuity letter and bank proof ready.