Senior Citizen Savings Scheme at 8.2%: Rs 30 Lakh Limit, 5-Year Tenure and Quarterly Payouts

The Senior Citizen Savings Scheme (SCSS) pays 8.2% per annum for the July-September 2026 quarter (Q2 FY 2026-27), the same rate that has held since the Government fixed it effective 1 January 2024. For a retiree building a predictable income floor, that headline number matters less than the mechanics behind it: a Rs 30 lakh individual ceiling, a fixed 5-year tenure, and interest that lands in your bank account every quarter rather than being locked away until maturity. This guide walks through the rules, the tax that applies when the money reaches your hands, and a multi-year drawdown worked in rupees, then contrasts SCSS with the Post Office Monthly Income Scheme (POMIS) and other small-savings options so you can decide where a retirement corpus should sit.

Small-savings rates are reset every quarter by the Ministry of Finance, so the 8.2% figure below is valid for Q2 FY 2026-27 and is next due for review on 1 October 2026. Always confirm the live rate on the Department of Posts savings page before you open an account.

The Scheme Explained

SCSS is a Government-backed deposit scheme governed by the Senior Citizen's Savings Scheme, 2019 notification under the Government Savings Promotion Act. It is an active, open scheme available through India Post and most authorised banks. Do not confuse it with the Pradhan Mantri Vaya Vandana Yojana (PMVVY), the LIC-run pension plan whose subscription window has closed; SCSS remains fully open for fresh deposits in FY 2026-27.

Who can open one. The core eligibility is any resident individual aged 60 years and above. Two early-entry windows exist: a person aged 55 to 60 who has retired under superannuation or a Voluntary Retirement Scheme may open an account provided the deposit is made within one month of receiving retirement benefits and does not exceed those benefits; and retired defence personnel are eligible from 50 years of age, subject to conditions. Non-resident Indians and Hindu Undivided Families cannot open SCSS accounts.

Rate and payout. The scheme carries 8.2% per annum for Q2 FY 2026-27. Interest is calculated on the deposit and paid out quarterly — credited on the first working day of April, July, October and January. Because the interest is paid out and not reinvested, the investor receives the full 8.2% as cash flow each year rather than watching it compound inside the account.

Deposit limits and tenure. The minimum deposit is Rs 1,000 and the maximum an individual can hold across all SCSS accounts is Rs 30 lakh — a ceiling raised from the earlier Rs 15 lakh in 2023. Deposits above the cash threshold must be made by cheque or NEFT. The account runs for a fixed 5-year tenure and can be extended once for a further 3-year block on maturity, at the rate prevailing on the date of extension. A husband and wife who are both eligible can each hold Rs 30 lakh, letting a couple park up to Rs 60 lakh in the scheme between two accounts.

Premature closure. SCSS allows exit before the 5 years are up, but with a penalty. Close after one year but before two years and the intermediary deducts 1.5% of the principal; close after two years and the deduction falls to 1% of the principal. Closure within the first year forfeits interest already paid, which is recovered from the principal. The scheme therefore rewards holding the deposit for its full term, which is why it suits money you genuinely will not need before the tenure ends.

Here is how SCSS compares with the other fixed-return retirement options a 60-year-old is likely to weigh, using the verified Q2 FY 2026-27 small-savings rates:

SCSS carries the highest rate of the four and, unlike NSC or PPF, hands you the return as spendable quarterly income — the reason it sits at the centre of most fixed-income retirement plans. POMIS pays monthly, which suits a household that budgets month to month, but its lower rate and tighter deposit ceiling make it a complement to SCSS rather than a replacement. To pit a scheme-based income against a market-linked withdrawal plan, model both sides in the annuity vs SWP calculator.

Tax on Withdrawal

SCSS has no capital-gains dimension, so there is no LTCG or indexation to consider. The tax treatment splits cleanly into two parts: the interest, which is taxable as you earn it, and the principal, which is not taxed when it returns to you at maturity because it is your own capital being repaid.

Interest is fully taxable. Every rupee of SCSS interest is added to your total income under the head "Income from Other Sources" and taxed at your applicable slab. There is no exemption on the interest itself. This is the single most important tax fact about the scheme: the 8.2% is a pre-tax rate, and your post-tax return depends on the slab you fall into.

TDS at source. Under Section 194A of the Income-tax Act, the bank or post office deducts tax at source once your SCSS interest crosses Rs 1,00,000 in a financial year for a senior citizen. That threshold was raised from Rs 50,000 by the Finance Act 2025, effective 1 April 2025, and continues to apply in FY 2026-27. A retiree whose total income falls below the taxable limit can submit Form 15H to stop the deduction. TDS is not an extra tax — it is adjusted against your final liability when you file your return — but it does affect quarterly cash flow, so plan for it.

Deductions that soften the bill (old regime only). Under the old tax regime, the SCSS deposit qualifies for a deduction under Section 80C up to the overall Rs 1.5 lakh limit in the year of deposit, and a senior citizen can additionally claim up to Rs 50,000 of interest income as a deduction under Section 80TTB. Both of these disappear under the new regime, which offers no 80C or 80TTB relief. The new regime instead leans on a higher standard deduction of Rs 75,000 (against Rs 50,000 in the old regime) and a far larger Section 87A rebate.

Why many retirees still pay nothing. For FY 2026-27 under the new regime, the Section 87A rebate is up to Rs 60,000 for a total income of up to Rs 12,00,000, so a retiree whose SCSS interest plus pension stays under that ceiling can end up with a nil liability even without 80C. The table below sets the two regimes side by side for the FY 2026-27 figures verified on Oquilia's rate desk.

The Income-tax Department's guidance on Section 194A and Section 80TTB is published on incometax.gov.in. The choice between regimes turns on how much deduction you can actually use: a retiree with little to claim beyond the standard deduction is usually better off in the new regime, while one carrying a full Rs 1.5 lakh of 80C plus 80TTB may still favour the old one.

Worked Drawdown

Consider Mr Rao, who turns 60 in FY 2026-27 and places the full Rs 30,00,000 into SCSS at 8.2%. His annual interest is Rs 30,00,000 x 8.2% = Rs 2,46,000, paid as Rs 61,500 every quarter — roughly Rs 20,500 a month of spendable income. Because the interest is withdrawn each quarter rather than reinvested, the principal stays at Rs 30 lakh throughout, and the payout is identical in every one of the five years:

Over the full 5-year tenure Mr Rao draws Rs 12,30,000 in interest and then gets his Rs 30,00,000 principal back at maturity — a total of Rs 42,30,000 received. He can then extend the account for a further three years at the then-prevailing rate, or redeploy the Rs 30 lakh elsewhere.

Now scale it to a couple. If Mrs Rao is also 60 and opens her own Rs 30 lakh account, the household holds Rs 60,00,000 in SCSS and draws Rs 4,92,000 a year, or Rs 1,23,000 each quarter. That is the hard ceiling for a two-person household, because the Rs 30 lakh limit is per individual and cannot be topped up further.

What the tax does to the cash flow. Take Mr Rao's Rs 2,46,000 of SCSS interest alongside a pension of Rs 3,00,000, for a total income of Rs 5,46,000. Under the new regime, after the Rs 75,000 standard deduction his taxable income is Rs 4,71,000; the tax on that is well within the Rs 60,000 Section 87A rebate for incomes up to Rs 12,00,000, so his liability is nil and no cess applies. His full Rs 61,500 quarterly payout stays in his pocket. A retiree in a higher bracket who prefers the old regime would instead lean on the Rs 1.5 lakh 80C deduction on the deposit and the Rs 50,000 80TTB deduction on interest to trim the bill.

Sequencing across schemes. A common retirement structure is to lay a fixed-income floor with SCSS and POMIS and hold a separate equity-oriented pot for later years, drawing the market pot down through a systematic withdrawal plan once the guaranteed income is set. Model how long the combined corpus lasts, and at what withdrawal rate, in the retirement drawdown calculator, and benchmark SCSS against a bank deposit for seniors using the senior citizen FD calculator. If part of your corpus arrives as a lump-sum gratuity, remember the tax-free gratuity ceiling under Section 10(10) is Rs 20 lakh.

FAQ

What is the SCSS interest rate right now?

The Senior Citizen Savings Scheme pays 8.2% per annum for the July-September 2026 quarter (Q2 FY 2026-27), unchanged from the rate fixed effective 1 January 2024. Small-savings rates are reviewed quarterly, with the next review due on 1 October 2026, so confirm the live figure on the Department of Posts savings page before depositing.

How much can I invest in SCSS?

An individual can hold a maximum of Rs 30 lakh across all SCSS accounts, with a minimum of Rs 1,000. Because the limit is per person, a husband and wife who are each eligible can hold Rs 30 lakh apiece, taking a household to Rs 60 lakh in the scheme.

When is SCSS interest paid?

Interest is paid quarterly, credited on the first working day of April, July, October and January. On a Rs 30 lakh deposit at 8.2%, that works out to Rs 61,500 per quarter, or Rs 2,46,000 across the year.

Is SCSS interest taxable?

Yes. SCSS interest is fully taxable at your slab rate under "Income from Other Sources". TDS under Section 194A is deducted once interest crosses Rs 1,00,000 in a financial year for a senior citizen — a threshold raised from Rs 50,000 by the Finance Act 2025. The principal returned at maturity is not taxed, as it is your own capital. Under the old regime you can claim the deposit under Section 80C and up to Rs 50,000 of interest under Section 80TTB; neither is available in the new regime.

Can I withdraw from SCSS before 5 years?

Yes, but with a penalty. Closing after one year but before two costs 1.5% of the principal; closing after two years costs 1% of the principal. Closure within the first year forfeits any interest already paid. The account can also be extended once for three more years after the initial 5-year term.

SCSS or POMIS for monthly retirement income?

SCSS pays a higher rate (8.2% versus 7.4% for the Post Office Monthly Income Scheme) but disburses quarterly, while POMIS pays monthly against a lower deposit ceiling of Rs 9 lakh single or Rs 15 lakh joint. Many retirees use both — SCSS for the bulk of the fixed-income floor and POMIS for a monthly top-up — rather than choosing one over the other.