SCSS maturity rules explained: Can senior citizens extend their account's tenure?

The Senior Citizens Savings Scheme (SCSS) remains one of the most popular fixed-income investment options for retirees due to its government backing, regular quarterly payouts and higher interest rates than most FDs. The scheme comes with an initial maturity period of five years.

After the completion of the tenure, account holders can either withdraw the maturity amount or choose to extend the account in blocks of three years. Earlier an extension was allowed only once, however after an amendment notified in November 2023, investors can now do it as many times as they want, provided the request is made within one year after each maturity period.

Any individual who is 60 years of age or older can open an SCSS account and invest in the scheme. Individuals between 55 and 60 years of age are also eligible, provided they have retired under a superannuation or voluntary retirement scheme and open the account within one month of receiving retirement benefits. In addition, retired defence personnel can invest in SCSS from the age of 50 years, subject to the applicable conditions.

How to apply for an extension of SCSS?

To extend an SCSS account after maturity, the account holder must follow these steps:

Step 1: Visit the post office or bank branch where your account is maintained.

Step 2: Fill and submit the prescribed Form-4 (or Form-B) for extension within one year from the date of maturity.

Step 3: SCSS account holders can also apply for an extension online through the Department of Posts' internet banking portal.

Step 5: Carry the original SCSS passbook or deposit receipt, your Aadhaar card and PAN card to apply for an extension. You must also be a resident citizen of India to be eligible.

Step 6: Once the extension is approved, the account can continue for an additional period of three years.

However, an account holder must note that an application for extension must be submitted within one year from the date of maturity.

Once an extension is approved, it is considered effective from the date of maturity itself, even if the application is submitted later within the allowed one-year period. This rule ensures there is no gap in interest payments.

Interest rate during period of extension

During the extended period, the account will continue to earn interest at the SCSS rate applicable at the time of maturity or extension, as notified under the scheme rules from time to time.

At present, SCSS offers an interest rate of 8.2% per annum. The rates are reviewed quarterly by the government and are generally aligned with other small savings schemes. Interest under SCSS is paid on a quarterly basis, making it a regular income source for many retirees.

What happens if you prematurely close an account after extension?

If the account is closed within one year of extension, then a penalty will be applicable in that case, according to a report by Upstox.

In such cases, a penalty equal to 1% of the deposit amount is deducted before the remaining balance is paid to the account holder. This deduction applies in cases of premature closure and is aimed at discouraging early withdrawal after opting for the extension facility.

Minimum and maximum investment limit in SCSS

The minimum deposit required is ₹1,000, and investments must be made in multiples of ₹1,000. The maximum total investment allowed across all SCSS accounts is ₹30 lakh per individual. This limit applies whether you open one account or multiple accounts at different banks or post offices.

An SCSS account can be opened either individually or jointly with a spouse. In the case of a joint account, the entire deposit is considered to belong to the first account holder, and the investment limit applies only to that person.

However, Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not permitted to invest in the scheme. Only eligible resident individuals can take advantage of the scheme’s secure returns and quarterly interest payout.