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SCSS taxation in 2025: How much of your Senior Citizen Savings Scheme interest income is taxable?
4 min read | Updated on January 09, 2025, 08:06 IST
SUMMARY
SCSS allows senior citizens to claim tax deductions against the invested amount under section 80C, but the income earned from such investment is not tax-free. However, they can claim a tax deduction for interest income up to ₹50,000.
SCSS is a better option than bank and post office fixed deposits for senior citizens. Representational image
Senior Citizen Savings Scheme (SCSS) is one of the popular investment options for those above 60 years of age. This scheme doesn’t offer any tax benefit under the new tax regime.
However, certain concessions are available under the old tax regime. This article provides a detailed explanation of the taxation of investments in SCSS.
There are two parts to the taxation of investments under SCSS that senior citizens, or those planning to open SCSS accounts, should know:
1. Taxation of SCSS deposits
However, senior citizens filing taxes under the old regime can claim a deduction. They are allowed a deduction of up to ₹1.5 lakh under section 80C of the Income-tax Act, 1961.
Though a senior citizen can invest up to ₹30 lakh at once in a SCSS account, the maximum deduction that can be claimed under section 80C is just ₹1.5 lakh in a financial year.
For example, if a senior citizen invested ₹5 lakh in his SCSS account in April 2024. He can claim a deduction of ₹1.5 lakh while filing the Income Tax Return (ITR) for Assessment Year 2025-26 in July this year. However, he will not be able to claim a deduction for the remaining amount in the current year or the next year.
Additionally, the ₹1.5 lakh deduction will only be allowed if the account holder has not already exhausted the section 80C deduction limit by investing in other tax-saving schemes.
2. Taxation of interest income
The SCSS account pays a quarterly interest, typically at the start of each quarter. This interest income is taxable at individual slab rates applicable to account holders.
For example, let's assume a senior citizen has invested ₹10 lakh in his SCSS account for 5 years. At the current interest rate of 8.2%, the total interest income over 5 years will be ₹4.1 lakh, with an annual interest payout of ₹82,000. Out of this, he can claim a deduction of ₹50,000 under section 80TTB in the old regime, while the remaining amount will be taxable.
The following chart shows how much income is taxable in case of different investments ranging from ₹1 lakh to ₹30 lakh.
| Amount invested in SCSS account (₹) | Interest income in 5 years (₹)* | Interest income paid in 1 year (₹) | Total taxable interest income in 1 year (₹) |
|---|---|---|---|
| 1,00,000 | 41,000 | 8,200 | 0 |
| 2,00,000 | 82,000 | 16,400 | 0 |
| 3,00,000 | 1,23,000 | 24,600 | 0 |
| 4,00,000 | 1,64,000 | 32,800 | 0 |
| 5,00,000 | 2,05,000 | 41,000 | 0 |
| 6,00,000 | 2,46,000 | 49,200 | 0 |
| 7,00,000 | 2,87,000 | 57,400 | 7,400 |
| 8,00,000 | 3,28,000 | 65,600 | 15,600 |
| 9,00,000 | 3,69,000 | 73,800 | 23,800 |
| 10,00,000 | 4,10,000 | 82,000 | 32,000 |
| 15,00,000 | 6,15,000 | 1,23,000 | 73,000 |
| 30,00,000 | 12,30,000 | 2,46,000 | 1,96,000 |
*assuming an interest rate of 8.2% per annum
At this rate, SCSS remains a better option than bank and post office fixed deposits for senior citizens.
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