The Senior Citizens' Savings Scheme (SCSS) will pay 8.2% per annum from October 1 to December 31, 2026. The Finance Ministry announced on September 30 that small savings rates for Q3 FY2026-27 remain unchanged from July–September.
The headline rate is only part of the story. SCSS interest is fully taxable, so your real return depends on your total income, your tax regime and the deductions you can claim.
SCSS at a Glance
| Particular | Details |
| Interest rate | 8.2% p.a. (October–December 2026) |
| Payout | Quarterly (April 1, July 1, October 1, January 1) |
| Tenure | 5 years; the rate on the day you open the account is locked for the full term |
| Investment limit | ₹1,000 minimum' ₹30 lakh maximum per person |
| Eligibility | Residents aged 60+, retired civilian employees aged 55–60, retired defence personnel aged 50–60. NRIs and HUFs are not eligible |
| Early closure | Before 1 year: no interest. 1–2 years: 1.5% of deposit deducted. 2–5 years: 1% deducted |
| Taxability | Fully taxable at slab rates |
Explore in Details - Senior Citizen Saving Scheme with 5 New Rules
What Does ₹10 Lakh Earn?
- Gross interest: ₹82,000 a year
- Quarterly Payout: ₹20,500
This is gross interest. It is added to your taxable income and is not a tax-free yield.
Post-Tax Return: An Illustration
Tax on ₹82,000 of SCSS interest at different marginal rates, including 4% cess, excluding surcharge and any deductions:
| Marginal Tax Rate | Tax on ₹82,000 | Net Interest | Effective yield on ₹10 lakh |
| 5% | ₹4,264 | ₹77,736 | About 7.77% |
| 20% | ₹17,056 | ₹64,944 | About 6.49% |
| 30% | ₹25,584 | ₹56,416 | About 5.64% |
A retiree in the 30% bracket keeps roughly 5.6%, so the post-tax yield can be well below the headline 8.2%. Rates are illustrative; check the slabs applicable to you for the relevant year.
Taxability and TDS
- Taxability: SCSS interest is reported under "Income from Other Sources" in your ITR.
- TDS: TDS at 10% applies only if your interest from such deposits exceeds ₹1 lakh in a financial year, the threshold for senior citizens (earlier ₹50,000). From April 1, 2026, TDS on interest falls under Section 393 of the Income-tax Act, 2025 (earlier Section 194A).
- Form 121 (old Form 15H): If your total income is below the taxable limit, submit Form 121 it to avoid TDS.
- Reconcile: Match interest credited against Form 26AS and AIS before filing.
Old vs. New Tax Regime
| Nature | Old Regime | New Regime |
| Deduction on SCSS deposit (up to ₹1.5 Available lakh) | Available | Not available |
| Senior-citizen interest deduction (up to ₹50,000, earlier Section 80TTB) | Available, but confirm whether it covers SCSS interest | Not available |
| Rebate | Standard rebate rules | Higher rebate; income up to ₹12 lakh was made tax-free from FY 2025-26 |
Sources differ on whether the ₹50,000 interest deduction applies to SCSS directly or only to bank and post office deposit interest, so confirm before relying on it. Section numbers have also changed under the Income-tax Act, 2025. Compare your total tax under both regimes before investing.
Conclusion
SCSS offers government-backed quarterly income at 8.2%, but judge it on post-tax yield. Add up your pension, rent and other interest, estimate your tax, and keep emergency funds outside the scheme because early closure costs 1–1.5% of principal.
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