ITR Filing 2026: Kisan Vikas Patra (KVP) and National Savings Certificate (NSC) are among India's most popular government-backed small savings schemes. While both offer fixed returns and are considered relatively safe investment options, their tax treatment differs in important ways. Understanding how the interest earned on these investments is taxed—and how it should be reported in your Income Tax Return (ITR)—can help taxpayers avoid filing errors and remain compliant with tax regulations.

Here's a detailed guide explaining the taxation rules, available deductions, and the correct way to disclose KVP and NSC interest while filing your ITR.

Government Savings Schemes and Their Tax Benefits

Several government-backed savings schemes qualify for tax deductions under Section 80C of the Income Tax Act under the old tax regime. Eligible investments can generally be claimed within the overall annual deduction limit of ₹1.5 lakh, subject to applicable conditions.

Some of the commonly eligible schemes include:

• Public Provident Fund (PPF)
• Sukanya Samriddhi Yojana (SSY)
• National Savings Certificate (NSC)
• Senior Citizens' Savings Scheme (SCSS)
• Five-Year Post Office Time Deposit

However, while these investments may qualify for tax deductions, the tax treatment of the interest earned differs from one scheme to another.

PPF and SSY Offer Completely Tax-Free Returns

Among small savings schemes, PPF and Sukanya Samriddhi Yojana (SSY) provide one of the most tax-efficient investment structures.

Under the old tax regime:

• Investments qualify for deduction under Section 80C.
• Interest earned remains tax-free.
• The maturity proceeds are also exempt from income tax.

This makes both schemes attractive for long-term tax-efficient savings.

KVP Does Not Qualify for Section 80C Deduction

Unlike NSC, investments made in Kisan Vikas Patra (KVP) do not qualify for deduction under Section 80C.

Similarly, investments in the following schemes are generally not eligible for Section 80C benefits:

• Kisan Vikas Patra (KVP)
• Post Office Monthly Income Scheme (POMIS)
• Post Office Recurring Deposit (RD)
• One-, Two-, and Three-Year Post Office Time Deposits

While these schemes offer fixed returns, they do not provide tax deductions on the investment amount under Section 80C.

Is Interest on KVP and NSC Taxable?

Yes. The interest earned on both KVP and NSC is generally taxable.

Taxpayers are required to report the interest income under the head "Income from Other Sources" while filing their Income Tax Return.

The reporting can generally be done using either of the following accounting methods:

• Accrual Basis: Report the interest as it accrues each financial year.
• Receipt Basis: Report the interest when it is actually received.

Whichever method is adopted should generally be followed consistently in subsequent years to maintain uniform tax reporting.

Key Difference Between NSC and KVP Tax Treatment

Although interest from both schemes is taxable, there is an important distinction in how NSC is treated.

National Savings Certificate (NSC)

For NSC, the interest earned every year (except in the year of maturity) is deemed to be reinvested into the certificate.

Because of this deemed reinvestment:

• The annual accrued interest is taxable.
• The same interest may also qualify for deduction under Section 80C, subject to the overall deduction limit of ₹1.5 lakh under the old tax regime.
• In the final year of maturity, the interest remains taxable but is not treated as a fresh investment and therefore does not qualify for an additional Section 80C deduction.

Kisan Vikas Patra (KVP)

The tax treatment for KVP is different.

• The interest earned is taxable.
• No portion of the interest qualifies for deduction under Section 80C.
• The investment itself is also not eligible for Section 80C benefits.

As a result, KVP provides fixed returns but does not offer the additional tax advantage available to NSC investors.

Verify Interest Details in Your AIS Before Filing

Before submitting your Income Tax Return, taxpayers should review the interest information reflected in their Annual Information Statement (AIS).

Compare the figures shown in the AIS with:

• Interest certificates
• Post Office records
• Investment statements
• Personal financial records

If any discrepancies are noticed, they should be investigated and resolved before filing the return to minimize the possibility of future tax notices or mismatches.

Current Interest Rates for July–September 2026 Quarter

The Government of India reviews interest rates for small savings schemes every quarter.

For the July–September 2026 quarter, the interest rates announced on June 30, 2026, remained unchanged.

The applicable rates are:

• Kisan Vikas Patra (KVP): 7.5% per annum, with maturity after 115 months
• National Savings Certificate (NSC): 7.7% per annum

These rates continue to apply during the current quarter unless revised in a future government notification.

Important Points to Remember While Filing ITR

Before filing your Income Tax Return, keep these points in mind:

• Report interest from both KVP and NSC under "Income from Other Sources."
• Choose either the accrual or receipt basis of reporting and follow it consistently.
• Remember that only NSC offers the additional deemed reinvestment benefit under Section 80C (subject to the applicable limit and conditions).
• KVP interest remains fully taxable without any additional Section 80C deduction.
• Reconcile all interest figures with your AIS and investment records before filing.

Understanding the different tax rules applicable to KVP and NSC can help ensure accurate ITR filing, reduce the chances of discrepancies, and enable taxpayers to claim all eligible tax benefits under the applicable provisions of the Income Tax Act.