Any individual aged 60 and above can apply for the Senior Citizen Savings Scheme (SCSS). The scheme offers a fixed 8.2 per cent interest on deposits by post offices and designated banks. However, SCSS returns beyond the limit of Rs 1.5 lakh under section 80C of income tax are taxable. An individual can open multiple accounts but the maximum deposit limit is Rs 30 lakh.

One can invest in the scheme individually or jointly with spouses. The interest is paid on fixed dates—April 1, July 1, October 1, and January 1 in every financial year. The interest is transferred directly to the accountholder’s bank or post office savings account.

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The SCSS scheme has a lock in of five years. However, it allows premature withdrawals and closure under certain conditions for a penalty, depending on the holding period.

Premature Closure Of SCSS Account Before A Year:

If the account is closed within a year from the date of account opening, the accountholder will not receive any interest. If it has been already paid, it will be recovered. Therefore, if you open an SCSS account, stay invested in it for at least one year to earn interest.

Premature Closure After A Year But Before Two Years:

Withdrawals made after a year but before two years, an amount equal to 1.5 per cent of the deposit will be deducted from the principal amount.

Premature Closure After Two Years But Before Five Years:

In case of withdrawal after two years but before five years, an amount equal to 1 per cent of the deposit will be deducted before transferring the balance amount to the accountholder.

Also Read: Withdrawal Rules For NPS Tier I Account: All You Need To Know

Premature Closure During Extended Period:

On November 14, 2023, the Department of Posts announced changes in the SCSS scheme. As per the notification, the account can be extended unlimited times in blocks of three years. Earlier, only one extension was allowed, and premature closure was permitted only after a year from the date of extension. SCSS now allows extension indefinitely till the accountholder’s death.

In the case of an extended period, premature withdrawal is permitted before a year. In that case, the penalty will be 1 per cent of the deposit if withdrawal is done before a year from the date of extension. The penalty will be deducted from the principal, and the balance amount will be transferred to the accountholder. After a year, there is no deduction on withdrawal.