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Senior citizens do not have any active income and ability to earn post their retirement, they thus depend on the interest income and cannot  take any risk with their money. Senior Citizen Saving Scheme (SCSS) is one of the avenue which gives better returns than other products and is perfectly safe. Let us discuss.

Who can deposit money under Senior Citizen Saving Scheme (SCSS)

Any resident individual can open an account under this scheme with post office or designated banks,  either singly  or jointly with  spouse. Your spouse can also open an account under this scheme provided he/ she fulfils the age criterion. Account under this scheme cannot be opened by or on behalf of an HUF.

You can appoint one or more nominees for deposits under this scheme. The nomination can be made at the time of opening the account itself or anytime thereafter which can be modified or cancelled any time and any number of times during currency of the account.

If you have retired on superannuation or have taken voluntary retirement, you  can also invest under this scheme provided you have completed 55 years of age at the time of opening the account.  The age limit does not apply for retired personnel of defence services. In either of the case, the account under SCSS has to be opened within one month from the receipt of retirement money with proof of disbursal. Only the money received as retirement benefits under the terms of such retirement can only be invested under this scheme.

Amount of deposits under Senior Citizen Saving Scheme

One can deposit only upto Rs 15 lakh under this scheme either by opening a single account or a joint account.  Since for determining the eligibility to open the account under this scheme the age of the first holder is only considered, the spouse can be added as joint holder even if he/se has not completed the required age.  The deposits within the overall limit can be made either in one single account or in multiple accounts.

Tenure and premature withdrawal from Senior Citizen Saving Scheme

The initial tenure of the account opened under SCSS is five years but can be extended for once for another period of three years. Deposits made under SCSS can only be withdrawn after completion of one year and that too with a penalty. A penalty of 1.50% of the deposit amount is levied if you close the account after one year but before completion of two years. The amount of penalty comes down to 1% for accounts closed after two years.  The deposits under extended account can be withdrawn any time after one year without any penalty. As deposits under SCSS cannot  be withdrawn within one year, you should assess your liquidity requirement for next year before making deposits under SCSS.

Rate of Interest and Taxability of Senior Citizen Saving Scheme

Interest under this scheme, which is paid quarterly, is decided every quarter by the government in advance. Presently, the rate of interest for this scheme is 8.6 percent for the running quarter. The payment date for first interest is adjusted so as to make all the subsequent payments quarterly.

The interest under SCSS is fully taxable and the banks/post offices will deduct tax @ 10% under section 194A  if the interest for the whole year is more than Rs 50,000 in a year in case you are over 60 years otherwise the limit for TDS is Rs. 10,000 p.a..  In case you are a senior citizen and do not have any tax liability, you can submit form 15H for getting interest without TDS and in case of non senior citizen other have to submit form 15G.

What happens in the event of death of the account holder?

In case of death of the account holder the amount of deposit in a single account becomes payable to legal heirs and is paid immediately to the nominee if nomination has already been filed. In case of a joint account or where the spouse is only nominee, the deposit under the scheme gets transferred to the spouse provided the aggregate of the deposit being transferred along with the deposit held by the spouse in her/his name does not exceed the maximum ceiling of Rs. 15 lakhs. In case the aggregate of these deposits exceed this threshold, the excess amount has to be refunded to the joint holder immediately.

SCSS helps you earn good return without risking your capital. Quarterly payment of interest also ensures cash flow at regular intervals to meet day today expenses. The subscription to this scheme is eligible for deduction under Section 80C within the overall limit of Rs. 1.50 lakh. The benefit of deduction under Section 80 C is very helpful and comes handy for senior citizens as many other avenues for claiming tax deductions under Section 80C like life insurance premium, payment towards pension plan, contribution to PF/PPF, ULIP, school fee etc. no longer workable or remain attractive to senior citizens.

Since the aggregate amount of deposit which one can make under this scheme is 15 lakhs but the deduction available under Section 80C is restricted to Rs. 1.50 lakhs, you should stagger your deposits under this scheme  over the years in such a way to maximise the tax benefits.

I am sure this discussion will help you in better organizing your savings.

The writer is a tax and investment expert and can be reached on and @jainbalwant on twitter

(Republished with amendments)

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  1. Ajit Jain says:

    Request kindly guide me.I have SCSS2004 deposits (9 a/c’s worth 15 Lakh) in IDBI Bank Vijaynagar branch Indore since 2015.I had been regularly submitting 15H form mostly in the 1st week of April every year.But, in2020-21 & 21-22 the bank has deducted TDS in Q4 without giving any intimation in advance or at the time of deductions made.Due to my long sickness & absence from my permanent residence, I missed to follow the bank for the same.There was also no intimation from the bank providing TDS Certificate for the respected period.
    ITR are being submitted by me very year in time having nil tax liability.
    1)Bank was obliged to intimate about deduction of TDS at the time of crediting Qrly. interest paid?
    2) What should I do next?I am confused.
    Thanks &Regards,
    Ajit Kumar Jain

  2. MDatta says:

    If the First Holder of SCSS dies and the scheme is continued by Spouse being a Joint holder 15g/h needs to be submitted on whose name?

  3. VK Wasnik says:

    Can I invest more than 15 lakhs in a financial year in Sr citizen savings scheme 2004 if not what is the best option on which I can claim tax benefit also .

    1. Balwant Jain says:

      One can invest in SCSS in more than one year but the aggregate of deposits in all accounts taken together can not exceed 15 lakhs at any given point of time. You can invest another 15 lakhs in Pradhan mantri vay Vandana yojna. You can invest any amount in RBI floating rate saving bonds.

  4. MANIK LAL GHOSH says:

    I am retired pension holder, If I want to open account in SCSS scheme with my wife, who is housewife & Sr. citizen , ist name is my wife & 2nd name is myself, whether interest obtained on such deposits will be taxable or not or within taxable limit


    I regularly invest in SCSS. Recently I went through a nightmare. My both children have now become foreign nationals and the nomination in their favour does not get accepted by the Computer System.The rules permit nomination of foreign nationals. I took up the matter with Post Master General, Madurai also. Still no solution.

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May 2024