Individuals aged 60 and above can open a senior citizen savings account (SCSS), offering a guaranteed 8.2 per cent yearly interest on deposits, higher than fixed deposit (FD) rates at post offices and many banks. SCSS account holders can claim tax deductions of up to Rs 1.5 lakh in a financial year under section 80C of the old tax regime. One can invest up to Rs 30 lakh in SCSS.

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The SCSS scheme allows the opening of an individual and a joint account with a spouse. It pays interest on fixed dates: April 1, July 1, October 1, and January 1 in each financial year, which is transferred directly into the account holder’s bank or post office savings account.

Although the account matures in five years, it allows premature exit during a financial emergency for a penalty, depending on the account’s duration.

Before a Year:

If the account is closed within a year from the opening date, the account holder will lose the accumulated interest. If the interest has already been paid, it will be recovered. So, stay invested in the scheme for at least a year to earn the accumulated interest amount.

After a Year but Before 2 Years:

For withdrawals after a year but before two years, SCSS will deduct 1.5 per cent of the principal amount and return the rest to the account holder.

After 2 Years but Before 5 Years:

For withdrawals after two years but before five years, it will deduct 1 per cent of the deposit and return the rest.

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Exits during the Extended Period:

Through a notification on November 14, 2023, the Department of Posts announced changes in the SCSS scheme to allow account holders to extend the account unlimited times in blocks of three years until death. Earlier, only one extension was allowed, and premature closure was permitted after the expiry of a year from the date of extension.

Premature withdrawals before the completion of a year during an extended period will attract a penalty of 1 per cent of the principal amount; the rest is returned to the account holder. If withdrawn after a year, there is no penalty.