Income Tax Returns (ITR) filing: Interest from PPF is tax exempt; but on NSC, it is taxable

Income Tax Returns Filing: Ever year when filing the income tax return, we come across a lot of issues. One of them is related to tax exemption related investments. Below is one such query answered by Chirag Nangia:

Last year I invested in ELSS for tax-saving but since this year market is down I don't want to invest in stocks. Since I already have EPF from my office, should I still invest in PPF? And are NSC and Kisan Vikas Patra also good to invest in? – Vijay Kadam

Deduction under section 80C of the Income Tax Act 1961 (Act) can be claimed to the extent of Rs 1,50,000 cumulatively for the items specified in that regard. From the tax point of view, you may consider to invest into PPF or NSC to an upper limit of Rs 1,50,000 including employee's contribution to EPF. However, it may be noted that the interest earned from PPF is currently exempt from tax whereas interest on NSC is taxable. Please note that investment in Kisan Vikas Patra does not offer any tax benefit, that is, neither the investment is deductible nor the interest earned is tax free.
I will be retiring from BARC and will be shifting to a rented house since my son is completing his studies. For a couple of years till he finds a job we plan to stay in Mumbai and later shift to Chennai. Can I claim tax exemption on the rent I pay as now I am not employed? To whom should I show the rent receipts? – Venkat Ranganathan

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The deduction for rent paid may be claimed under section 80GG of the Act within prescribed limits and prescribed conditions as entailed in the section. A taxpayer who neither claims the benefit of house rent allowance nor has claimed the deduction under any other section of the Act, can claim benefit of deduction under the aforesaid section. However, the taxpayer/ close relatives should not own any accommodation at the place where he resides/ carries out its business/ duties or at any other place where he is claiming the tax benefit for the property as a self-occupied property.

By Chirag Nangia. The writer is director, Nangia Advisors LLP