ITR Filing FY26: NSC and KVP Interest Reporting Rules Every Taxpayer Should Know

Government-backed small savings schemes such as the National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) continue to be popular investment options for risk-averse investors. However, while filing your Income Tax Return (ITR) for FY26, it is important to understand how the interest earned from these schemes should be reported, as the tax rules for NSC and KVP are different.

Incorrect reporting of interest income may result in mismatches with the Annual Information Statement (AIS), leading to notices or delays in processing your return.

How to Report NSC and KVP Interest in ITR

Interest earned on both NSC and KVP should be disclosed under the 'Income from Other Sources' head in your income tax return.

Taxpayers can report the interest either on an accrual basis every year or on a receipt basis when the investment matures. However, once a method is chosen, it should be followed consistently in subsequent years.

Before filing your return, compare the interest amount with your Annual Information Statement (AIS) to ensure there are no discrepancies.

NSC vs KVP: Know the Tax Rules

Although both schemes generate taxable interest, NSC offers an additional tax benefit. The interest accrued each year, except in the year of maturity, is deemed to be reinvested and qualifies for a deduction under Section 80C, subject to the overall limit of ₹1.5 lakh under the old tax regime. The final year's interest, however, is taxable and is not eligible for the deduction.

In contrast, Kisan Vikas Patra does not provide any Section 80C benefit. The entire interest earned on KVP is taxable and should be reported accordingly in the ITR.

Latest Interest Rates

For the July-September 2026 quarter, the government left small savings interest rates unchanged. NSC continues to offer 7.7% annual interest, compounded annually, while Kisan Vikas Patra offers 7.5% annual interest, with the investment maturing in 115 months.

Read more: Dr. Reddy's Laboratories Share Price Falls Over 2% After Q1 FY27 Earnings Results: Total Income Down 4.6% YoY.

Conclusion

When filing your ITR for FY26, correctly reporting interest from NSC and KVP is just as important as declaring other sources of income. While NSC provides an additional Section 80C benefit on accrued interest, KVP interest remains fully taxable. Reviewing your AIS and understanding these reporting rules can help you file an accurate return and avoid unnecessary tax issues.

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