As we age, adding more debt components in our portfolio becomes a key priority. These assets with their guaranteed returns, provide more stability, allowing senior citizens to have more control over their cash flow. In India, one such popular investment tool is the Senior Citizen's Savings Scheme (SCSS).
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With deposits ranging fromRs 1,000 to Rs 30 lakh, the SCSS scheme is designed for people aged 60 or above or retired individuals aged 55. You have the option to open the account individually or jointly with a spouse.
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While SCSS has a five year lock-in period, it ensures periodic cash flow by crediting interest every quarter at 8.2% p.a. After the initial five years, account holders can also extend the account for three years.
Still, if you want more liquidity over your finances, it is important to understand the rules that govern SCSS, any penalties, taxes and other aspects to optimise your financial planning.
TDS in SCSS:
Tax Deducted at Source (TDS) rules for the Senior Citizens' Savings Scheme (SCSS) govern how and when tax is withheld from your quarterly interest payouts. Whether TDS is cut depends on three things: the account holder's age, whether they've submitted a tax-exemption form, and whether a valid PAN is on record.
Age under 60:
Situation | Result |
Form 15G submitted | No tax deducted |
Form 15G not submitted | 10% TDS |
PAN not given or invalid | 20% TDS |
Note: TDS applies only if total interest across all the person's SCSS accounts in a financial year exceeds Rs 50,000.
Age over 60:
Situation | Result |
Form 15H submitted | No tax deducted |
Form 15H not submitted | 10% TDS |
PAN not given or invalid | 20% TDS |
TDS is deducted at source only if your total annual interest income from SCSS exceeds Rs Rs 1 lakh in a financial year.
If you are aged 60 or above and your total estimated tax liability for the entire financial year is nil, you can submit Form 15H (unified Form 121 introduced in April 2026) to the bank or post office at the beginning of the financial year to prevent TDS.
Even if your interest stays below the Rs 1,00,000 TDS threshold and no tax is deducted at source, the interest earned on SCSS is fully taxable and must be added to your total income according to your income-tax slab rate.
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Penalties For Early Withdrawals:
The account holder can close the account early by submitting an application in Form-2.
- Before 1 year: Interest already paid will be recovered from the deposit, and the balance will be returned.
- After 1 year but before 2 years: 1.5% of the deposit will be deducted.
- After 2 years: 1% of the deposit will be deducted.
- Extended account: After one year of extension, the account can be closed without any deduction.
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