The Senior Citizens Savings Scheme pays 8.2% a year for Q2 FY 2026-27, the quarter running from 1 July to 30 September 2026, and that interest is paid out to you every quarter rather than added to your deposit. You can put in up to ₹30 lakh across all your SCSS accounts. The term is five years, extendable in blocks of three. The deposit is a Government of India liability rather than a bank’s.
The paid-out interest is the point of the scheme and the thing most coverage gets wrong. SCSS is an income product. It does not grow your capital, and it is not trying to.
The rate, and how long it lasts
Small savings rates are notified quarterly by the Ministry of Finance, on 1 April, 1 July, 1 October and 1 January. The SCSS rate for the current quarter is 8.2%, and rates across the small savings family have been unchanged since April 2024.
The part that matters more than the headline number: the rate in force on the day you open the account is the rate you keep for the whole five-year term. SCSS does not reset every quarter the way PPF does, so if the Ministry cuts the rate next quarter, an account opened this quarter carries on at 8.2% until it matures. That makes the timing of an opening genuinely consequential when rates are falling.
When you extend, the extended block earns the rate in force on the maturity date, not the rate you originally locked in. Check the notified rate before signing the extension form.
Interest is paid out, not compounded
Work through what a deposit actually produces, because this is where most published figures are wrong.
| Deposit | Interest a year at 8.2% | Paid each quarter | Crosses the ₹1,00,000 TDS threshold |
|---|---|---|---|
| ₹5,00,000 | ₹41,000 | ₹10,250 | No |
| ₹10,00,000 | ₹82,000 | ₹20,500 | No |
| ₹15,00,000 | ₹1,23,000 | ₹30,750 | Yes |
| ₹20,00,000 | ₹1,64,000 | ₹41,000 | Yes |
| ₹30,00,000 | ₹2,46,000 | ₹61,500 | Yes |
A full ₹30 lakh account pays ₹61,500 every quarter, which is ₹20,500 a month averaged out. Over five years it pays ₹12,30,000 in interest and returns the original ₹30,00,000. Total ₹42,30,000 — and not one rupee more, because the interest never sits in the account long enough to earn anything itself.
This is the test for any SCSS content you read. If a page or a tool tells you ₹30 lakh “matures at” ₹44 lakh or ₹45 lakh, it has quietly applied quarterly compounding to a scheme that pays quarterly withdrawals. Our own SCSS calculator models the payout stream, not a compounded balance.
The payout structure has two consequences. If you want the money to grow, a cumulative deposit is the right shape of product instead — that comparison is worked through in SCSS vs FD. And if you want the income, you need somewhere useful for it to land, because ₹61,500 a quarter left idle in a savings account is a real drag on the overall return.
Interest is credited in April, July, October and January. The first payment is usually smaller, because it covers only the stub period from the day you deposited to the end of that quarter.
Who can open an account
Three routes in, and the second one catches people out.
Age 60 and above. No further conditions, no time limit. This covers most account holders.
Age 55 to under 60, on retirement. Available to anyone who has retired on superannuation or under a voluntary retirement scheme, but only if the account is opened within one month of receiving the retirement benefits. The window runs from receipt of the money rather than from the retirement date, and once it closes there is no reopening it. If you are taking VRS and intend to use SCSS, arrange the paperwork before the settlement arrives.
Age 50 and above, retired defence personnel. Retired personnel of the defence services may open an account from 50, subject to the conditions attaching to that category.
Accounts are open to resident individuals only; non-resident Indians and Hindu Undivided Families cannot hold SCSS. A joint account is permitted with a spouse and with a spouse only, and the entire deposit is treated as belonging to the first holder. Complete the nomination at opening. You can open at any head post office or authorised branch of most public sector banks and several private ones, and the scheme, the rate and the rules are identical wherever you do.
How much you can deposit
The minimum is ₹1,000 and deposits must be in multiples of ₹1,000. The maximum is ₹30 lakh, aggregated across every SCSS account that individual holds — not ₹30 lakh per account, not per bank, not per post office. Two accounts of ₹20 lakh each are not permitted.
Because the ceiling is per person, an eligible couple can hold ₹60 lakh between them in two separate accounts — the commonest way to increase the allocation. It only works if each spouse qualifies independently; adding a spouse as second holder does nothing for the limit.
Where the deposit is made by cheque, the account opens on the day the cheque clears, which is also the day the rate locks in. Allow for that if you are opening near a quarter boundary.
Five years, then three-year blocks
The term is five years. On maturity you have three choices.
Close it. Principal is returned and the account ends.
Extend it by three years. Apply in the prescribed form within one year of the maturity date. The extension runs three years from the maturity date and earns the rate in force on that date. An extended account can be closed after one year of the block with no penalty deduction, which makes extending a low-cost decision.
Do nothing, which is the option to avoid. The account is treated as matured and further interest is paid at the Post Office Savings Account rate, around 4%. That is one of the less firmly sourced numbers on the small savings table, so confirm it at the counter — but the direction is not in doubt, because it is roughly half the SCSS rate.
Extension is not automatic. Diarise the maturity date the day you open the account.
Tax on SCSS, in detail
There are three separate tax questions here and they are usually run together. The section numbers below are the familiar ones from the repealed Income-tax Act, 1961; the Income-tax Act, 2025 renumbered these provisions and this page does not guess at the new numbers.
The deposit and section 80C
Money deposited into SCSS qualifies for the deduction long known as section 80C. That is a single annual cap shared with PPF, life insurance premiums, home loan principal repayment and the rest, so an SCSS deposit does not create headroom — it consumes headroom you may already be filling.
The deduction is available under the old regime only, and for most SCSS holders it is now worth nothing at all. Under the Income-tax Act, 2025, which took effect on 1 April 2026 and repealed the 1961 Act, the new regime is the default, sits at section 202 and carries no 80C. The old regime survives as an option you elect into, and very few retirees are better off electing into it. If you are on the new regime, opening an SCSS account gives you no deduction, and you should not let anyone sell it to you on that basis.
The interest
SCSS interest is fully taxable as income from other sources, in the year it is credited. There is no exemption and no concessional rate. This is the honest cost of an 8.2% headline: on a full ₹30 lakh account, ₹2,46,000 a year is added to your total income.
The senior-citizen deduction long known as section 80TTB gives a resident senior citizen up to ₹50,000 against interest from deposits with banks, co-operative banks and post offices — which is where SCSS accounts are held. Like 80C, it is available under the old regime only.
Whether that ₹50,000 is worth anything depends on your total income, and for most SCSS holders it is not. Under the new regime the basic exemption is ₹4 lakh with no age differentiation of any kind, and the 87A rebate takes tax to nil on total income up to ₹12 lakh. Under the old regime the exemption is ₹3 lakh at 60 to 79 and ₹5 lakh at 80 and above, with the rebate reaching only ₹5 lakh of income. A retiree whose income is ₹2,46,000 of SCSS interest plus a modest pension pays nothing under either regime, so both deductions are set against a liability that was already zero. Work your own case through the income tax calculator and old vs new tax regime before assuming the old regime is the retiree’s regime. It usually is not.
TDS, and the form that replaced 15H
TDS applies once your interest at that institution crosses ₹1,00,000 in a financial year, a threshold raised with effect from 1 April 2025 from the much lower figure most published guidance still quotes. The rate is 10%, or 20% where PAN has not been furnished.
At 8.2%, a deposit of roughly ₹12.2 lakh generates ₹1,00,000 of interest, so a full ₹30 lakh account will cross the threshold. Plan for it rather than being surprised by a short quarterly credit. TDS is not a final tax: it is credited against your liability and refunded through your return if you owe less, so a retiree with no liability gets it all back — several months later.
To avoid the deduction in the first place you file a declaration. Forms 15G and 15H were replaced by Form 121 with effect from 1 April 2026. Both age groups must satisfy two conditions: nil estimated tax liability for the year and total income below the basic exemption limit applicable to you. The widely repeated claim that senior citizens face only the first test and no income ceiling is false, and acting on it means filing a declaration you were not entitled to file. If your income is above the exemption limit, let the TDS happen and claim it back — more on that in tax on FD interest.
Getting out early
SCSS permits premature closure, at a cost that steps down with time.
| Closed | Deduction | On a ₹30 lakh account |
|---|---|---|
| Before one year | No interest is payable; interest already paid is recovered from the principal | Up to one year of interest clawed back |
| After one year, before two | 1.5% of the deposit | ₹45,000 |
| After two years, before five | 1% of the deposit | ₹30,000 |
An account in its extended block can be closed after one year of that block with no deduction at all.
The first row is the one to read twice. Closing inside twelve months does not merely stop the interest — the quarterly payouts you have already received are recovered out of your principal, so you get back less than you put in. If there is any realistic chance you will need the capital within a year, it should not be in SCSS.
Partial withdrawal is not available either: you close the account or you leave it. If you might need part of the money, open two or three smaller accounts within the ₹30 lakh ceiling rather than one large one, so an emergency costs you the penalty on one account instead of all of it.
Who it suits, and who it does not
SCSS is close to ideal for a retiree who wants predictable quarterly income, has already set aside an emergency fund elsewhere, and is content that the capital comes back nominally unchanged in five years. There is no market risk and no reinvestment risk during the term — and the ₹5 lakh deposit insurance ceiling that governs how much of a bank FD is protected is not the relevant comparison, because SCSS is a Government of India obligation rather than a bank liability.
SCSS is the wrong product in three situations. If you want the money to grow, the payout structure works directly against you. If there is a real chance you will need the capital inside a year, the clawback on early closure makes it actively harmful. And if the interest pushes you into a tax bracket, the after-tax return can fall below alternatives that defer the income — run the numbers before committing the full ₹30 lakh.
For most eligible retirees the sensible shape is a partial allocation: enough in SCSS to cover the predictable part of monthly spending, with the rest spread across instruments with different maturities and liquidity. The other small savings options and their limits are set out in post office savings schemes.
Before you open, confirm the current quarter’s notified rate on the National Savings Institute page rather than from any secondary source, including this one. The rate you see on the day you deposit is the rate you keep for five years.
Common questions
Does SCSS interest compound?
No. This is the single most misunderstood thing about the scheme. Interest is calculated on your deposit and paid out to your bank or post office account every quarter. It leaves the account, so it cannot earn interest on itself. A ₹30 lakh deposit at 8.2% pays ₹61,500 a quarter and returns exactly ₹30 lakh of principal after five years — never more. Any article or calculator showing a compounded SCSS maturity value is describing a product that does not exist.
Can my spouse and I each hold ₹30 lakh in SCSS?
Yes, if you both meet the eligibility rules in your own right. The ₹30 lakh ceiling applies per individual, aggregated across every SCSS account that person holds at any post office or bank. Two separately eligible spouses can therefore hold ₹60 lakh between them. A joint account is permitted only with a spouse, and the whole deposit in a joint account is attributed to the first holder for the purpose of that person’s limit — so a joint account does not create extra headroom.
Will TDS be deducted from my SCSS interest?
It will if your interest at that institution crosses ₹1,00,000 in a financial year — a threshold raised on 1 April 2025. At the current 8.2% rate, roughly ₹12.2 lakh of deposit is enough to cross it, so a full ₹30 lakh account definitely will. TDS is 10%, or 20% if you have not furnished a PAN. It is not an extra tax: it is credited against your liability and refunded through your return if you owe less.
I took VRS at 57. Can I open an SCSS account?
Yes, but the window is short. Anyone aged 55 or above who has retired on superannuation or under a voluntary retirement scheme may open an account, provided it is opened within one month of receiving their retirement benefits. Miss that month and you wait until 60. Retired defence personnel may open an account from age 50, subject to the conditions attaching to that category. Everyone else qualifies at 60 with no time limit.
What happens if I do nothing when the five years are up?
The account is treated as matured and stops earning the SCSS rate. Under the scheme rules, post-maturity interest is paid at the Post Office Savings Account rate — around 4% on the current small savings table, roughly half of what the money was earning the day before, though that is one of the less firmly sourced figures on the table and is worth confirming at the counter. Nothing is lost and you can close the account whenever you like, but leaving it to drift is expensive. Decide to close or extend before the maturity date, not after it.
Sources
Rates and rules on this page were read directly from the following sources on the dates shown. Figures change — if you are about to act on one, confirm it at the source.