Senior Citizens Savings Scheme: The Rs 30 Lakh Deposit Limit and Quarterly Interest Explained
SCSS pays 8.2% for Q2 FY 2026-27 on a lump sum up to Rs 30 lakh, credited quarterly. How the Rs 30 lakh limit, TDS, and slab tax compare with PPF for retirement income.
For a retiree sitting on a lump sum from provident fund settlement or gratuity, the question is rarely "how do I grow this money" but "how do I turn it into a dependable income". Since 1 April 2023 the Senior Citizens Savings Scheme (SCSS) has answered that question more generously than any other government small-savings product, after the maximum deposit ceiling was quadrupled from Rs 15 lakh to Rs 30,00,000. At the 8.2% per annum rate notified for the July to September 2026 quarter, a fully funded SCSS account throws off Rs 2,46,000 a year in guaranteed, sovereign-backed interest.
This piece compares SCSS with the Public Provident Fund (PPF) as the two anchors of a retirement drawdown plan, works through the quarterly-payout arithmetic on a Rs 30 lakh corpus, and sets out exactly how the interest is taxed under the FY 2025-26 rules. Every rate quoted is the one in force for Q2 FY 2026-27; verify the next notification after 1 October 2026 before acting on figures here.
The Scheme Explained
SCSS is governed by the Senior Citizens' Savings Scheme Rules 2019, framed under the Government Savings Promotion Act 1873 and administered through post offices and authorised banks. Eligibility opens at age 60. Individuals who have retired on superannuation or under a voluntary retirement scheme (VRS) can join between 55 and 60, and defence personnel from age 50, provided the account is opened within one month of receiving retirement benefits.
The single most important number changed in recent years is the deposit cap. With effect from 1 April 2023 the ceiling rose from Rs 15,00,000 to Rs 30,00,000 per individual, aggregated across all SCSS accounts a person holds. A married couple can therefore park up to Rs 60,00,000 between two accounts, deploying two lump sums of retirement money into the same 8.2% instrument. Deposits are made in a single tranche in multiples of Rs 1,000.
The tenure is five years, extendable once by a further three years by submitting the extension form within one year of maturity; on extension the account earns the rate applicable on the maturity date. Interest is not compounded inside the account. Instead it is paid out quarterly, credited on the first working day of April, July, October and January, which is precisely what makes SCSS a drawdown instrument rather than an accumulation one.
The rate is reset every quarter by the Ministry of Finance and has stood at 8.2% per annum for several consecutive quarters, including Q2 FY 2026-27 (Jul to Sep 2026). That is the highest headline rate in the small-savings basket, as the table below shows.
| Scheme | Rate (p.a.), Q2 FY 2026-27 |
|---|---|
| SCSS | 8.20% |
| EPF (FY 2025-26 declared) | 8.25% |
| NSC | 7.70% |
| Post Office MIS | 7.40% |
| PPF | 7.10% |
PPF, by contrast, is an accumulation vehicle. It pays 7.10% for the same quarter, compounds annually, locks money for 15 years, and caps fresh deposits at Rs 1,50,000 per financial year (see our PPF glossary entry for the account mechanics). You cannot move a Rs 30 lakh retirement corpus into PPF in one go; you can into SCSS. That structural difference, more than the 1.1 percentage-point rate gap, is why the two schemes play different roles in a retirement plan.
| Feature | SCSS | PPF |
|---|---|---|
| Rate (Q2 FY 2026-27) | 8.20% | 7.10% |
| Maximum deposit | Rs 30,00,000 (lump sum) | Rs 1,50,000 per year |
| Tenure | 5 years, extendable by 3 | 15 years |
| Interest treatment | Paid out quarterly | Compounded, paid at maturity |
| Eligibility | Age 60+ (55 on VRS, 50 defence) | Any resident individual |
| Interest taxation | Taxable at slab rate | Exempt under Section 10(11) |
Tax on Withdrawal
The tax treatment is where SCSS and PPF diverge most sharply, and it is the part retirees most often get wrong. SCSS interest is fully taxable as "Income from Other Sources" and added to total income at the applicable slab rate; it enjoys no exemption of the kind PPF does. There is no long-term capital gains angle here at all, because SCSS pays interest, not capital gains, so the 12.5% LTCG rate that applies to equity is irrelevant to this scheme.
Tax is deducted at source once total SCSS interest in a financial year exceeds Rs 50,000. On a Rs 30 lakh deposit the annual interest of Rs 2,46,000 sails well past that threshold, so TDS at 10% under Section 194A applies unless the account holder submits Form 15H declaring that estimated total income is below the taxable limit. TDS is a collection mechanism, not a final tax; any excess is refundable when the return is filed.
The principal itself is never taxed on withdrawal. When the five-year (or extended eight-year) term ends, the Rs 30,00,000 you deposited is simply returned as a repayment of capital, so there is no tax event on the corpus, only on the interest already declared year by year. Premature closure is permitted: closing after one year but before two costs a penalty of 1.5% of the deposit, and after two years the penalty is 1% of the deposit.
On the deduction side, the SCSS deposit qualifies under Section 80C up to the overall Rs 1,50,000 ceiling, but only if you are on the old tax regime. The new regime, which is the default for FY 2025-26, does not permit Section 80C, so a retiree who has opted into it gets no deduction for the deposit. What the new regime does offer the interest, however, is generous: the Section 87A rebate is now Rs 60,000, extinguishing tax entirely on total income up to Rs 12,00,000. A retiree whose only income is Rs 2,46,000 of SCSS interest therefore pays zero tax under the new regime, because that figure sits below even the Rs 4,00,000 basic exemption. Confirm your own position against the slab tables at incometax.gov.in before filing.
Worked Drawdown
Consider a retiree, aged 60, who receives Rs 45,00,000 in combined provident fund and gratuity settlement (gratuity being exempt up to the Rs 20 lakh cap under Section 10(10) of the Income-tax Act). She places the maximum Rs 30,00,000 into SCSS on 1 July 2026 and holds the balance elsewhere. The SCSS leg alone produces the following five-year income stream at the current 8.2% rate.
| Year | Principal | Annual interest @ 8.2% | Quarterly payout | Cumulative income |
|---|---|---|---|---|
| 1 | 30,00,000 | 2,46,000 | 61,500 | 2,46,000 |
| 2 | 30,00,000 | 2,46,000 | 61,500 | 4,92,000 |
| 3 | 30,00,000 | 2,46,000 | 61,500 | 7,38,000 |
| 4 | 30,00,000 | 2,46,000 | 61,500 | 9,84,000 |
| 5 | 30,00,000 | 2,46,000 | 61,500 | 12,30,000 |
Over the base five-year term the account pays out Rs 12,30,000 in interest and then returns the Rs 30,00,000 principal intact, a total cash return of Rs 42,30,000 on the original Rs 30,00,000. Because interest is paid out rather than reinvested, the principal never grows; the whole point is the Rs 61,500 landing in the bank every quarter. Extend the account for the further three years and, assuming the rate holds at 8.2%, another Rs 7,38,000 of interest accrues before final maturity.
Contrast this with trying to replicate the income from PPF. At 7.10% a PPF balance would need to reach roughly Rs 34,65,000 to generate the same Rs 2,46,000 a year, and even then the interest stays locked inside the account until the 15-year term ends rather than paying out quarterly. PPF cannot substitute for SCSS in the income phase; its role is tax-free accumulation, not distribution.
The sensible drawdown design is therefore a ladder rather than a single scheme. Use SCSS as the income engine for the first five to eight years, route the quarterly Rs 61,500 into monthly household spending, and keep any surplus compounding in PPF for the tax-free lump you will want in your seventies. Our retirement drawdown calculator lets you model how long a mixed corpus lasts at different withdrawal rates, and the annuity vs SWP calculator compares a guaranteed payout against a market-linked systematic withdrawal for the money that sits outside SCSS.
SCSS vs PPF: Building the Drawdown Ladder
A robust retirement plan rarely rests on one scheme. The Rs 30,00,000 SCSS cap covers a large slice of most middle-class corpora, but the Rs 61,500 quarterly cheque is fixed for the term and does not rise with inflation, so a second layer matters. Directing the Rs 1,50,000 annual PPF maximum into an account through the working years builds a parallel corpus that, at 7.10% compounding, is entirely tax-free on withdrawal under Section 10(11), giving you a bucket to draw on after the SCSS term expires.
For the portion of retirement money that can accept market risk, the National Pension System offers an equity-linked route with its own annuity-purchase rules at exit; our NPS calculator projects the corpus and pension for different contribution levels. The layering principle is simple: SCSS for immediate guaranteed income up to Rs 30 lakh, PPF for tax-free medium-term accumulation, and a growth sleeve for inflation protection over a 20-plus year retirement. Reviewing the mix each year against the quarterly rate notifications keeps the plan honest as the 8.2% and 7.10% figures move.
FAQ
What is the maximum I can deposit in SCSS in 2026?
The ceiling is Rs 30,00,000 per individual, in force since 1 April 2023 when it was raised from Rs 15,00,000. The limit aggregates across every SCSS account you hold, so a couple can invest up to Rs 60,00,000 across two separate accounts.
What interest rate does SCSS pay right now?
SCSS pays 8.20% per annum for the July to September 2026 quarter (Q2 FY 2026-27), unchanged from the previous quarter. The rate is reset quarterly by the Ministry of Finance, so the figure applicable to a fresh deposit is the one notified for the quarter of opening; check for the next revision after 1 October 2026.
Is SCSS interest tax-free?
No. SCSS interest is fully taxable as Income from Other Sources at your slab rate, unlike PPF interest which is exempt under Section 10(11). TDS at 10% under Section 194A applies once annual SCSS interest crosses Rs 50,000, though you can file Form 15H to stop deduction if your total income is below the taxable limit.
How is the interest paid out?
Interest is credited quarterly on the first working day of April, July, October and January, not compounded inside the account. On the maximum Rs 30,00,000 deposit at 8.2%, that is Rs 61,500 per quarter, or Rs 2,46,000 across the year.
Can I extend SCSS beyond five years?
Yes. The five-year account can be extended once for a further three years by applying within one year of maturity. On extension the account earns the SCSS rate prevailing on the date of maturity, and it can be closed at any time during the extension without penalty after the first year of the extended period.
Should I choose SCSS or PPF for retirement income?
For income during retirement, SCSS is the better fit: it accepts a Rs 30,00,000 lump sum, pays 8.20% quarterly, and is open from age 60. PPF, at 7.10% with a Rs 1,50,000 annual cap and a 15-year lock, is an accumulation tool for tax-free growth rather than a source of regular cash. Most retirees use both, with SCSS supplying income and PPF building a tax-free reserve.
What happens to my principal at maturity?
The full deposit is returned to you as a repayment of capital, with no tax on the principal because only the interest was ever taxable. A Rs 30,00,000 SCSS account therefore returns Rs 30,00,000 at the end of the term, after having paid out Rs 12,30,000 of interest over five years at 8.2%.