The Senior Citizens Savings Scheme is a post-office and bank deposit designed specifically for retirees. It offers a government-declared interest rate, quarterly payouts and tax benefits under Section 80C. For most senior citizens, it is the first instrument to fill when building a post-retirement income portfolio.
Eligibility
- Indian residents aged 60 years or above.
- Retired defence personnel aged 50 or above, and retired civilians aged 55 or above who open the account within one month of receiving retirement benefits, can also subscribe.
- Individuals who have taken VRS at 55 or above are eligible subject to conditions.
- NRIs and HUFs are not eligible.
Key features
| Feature | Detail |
|---|---|
| Minimum deposit | Rs 1,000 |
| Maximum deposit | Rs 30 lakh (raised from Rs 15 lakh in Budget 2023) |
| Tenure | 5 years, extendable by 3 years |
| Interest rate | Government-notified quarterly; recently around 8.2% |
| Interest payout | Quarterly, credited to bank account |
| Tax deduction | Up to Rs 1.5 lakh under Section 80C (old regime) |
Interest and taxation
The interest is paid quarterly and is fully taxable. If total interest in a financial year exceeds Rs 50,000, TDS at 10% is deducted. This threshold is higher than the Rs 40,000 limit for non-seniors, recognising that interest is often a primary income source for retirees.
Despite TDS, many senior citizens' total income falls below the taxable threshold after accounting for the higher basic exemption limit (Rs 3,00,000 under the old regime, Rs 3,50,000 for super-senior citizens aged 80+). In such cases, filing Form 15H at the bank prevents TDS deduction altogether.
The deposit itself qualifies for Section 80C deduction, but only under the old tax regime.
Premature withdrawal
Withdrawal is permitted after one year, with the following penalties: - Before 2 years: 1.5% of the deposit is deducted. - After 2 years but before 5 years: 1% of the deposit is deducted.
These are relatively mild penalties compared to the benefit of the higher rate, but the scheme is most effective when held to maturity.
Extension
After the initial 5-year term, you can extend for 3 more years within one year of maturity. The extended deposit earns the rate prevailing at the time of extension. If you do not extend, the maturity amount earns the post-office savings account rate, which is much lower.
Where SCSS fits in a retirement plan
SCSS should be the first port of call for safe, regular income after retirement. The combination of a government-guaranteed rate, quarterly payouts and a Rs 30 lakh ceiling makes it the highest-yielding guaranteed instrument available to senior citizens.
After exhausting the SCSS limit, consider PPF extension, the PM Vaya Vandana Yojana (if available), fixed deposits with a senior-citizen premium, and a conservative debt fund allocation.
Use our FD calculator to compare returns against bank fixed deposits for the same tenure.