Senior Citizen Savings Scheme: How does a change in interest rate affect senior citizens?

Any change in the Senior Citizen Savings Scheme (SCSS) interest rate can affect the final amount the depositor may receive upon maturity or upon account closure.

As the Finance Ministry is expected to announce the Senior Citizen Savings Scheme (SCSS) interest rate for the October-December quarter of FY 2025-26 on September 30, 2025, here's a look at how a change in interest rate will affect Senior Citizen Savings Scheme deposits of the elderly people.

How does SCSS interest rate work?

The Finance Ministry declares SCSS interest rate every quarter. The Senior Citizens’ Savings Scheme, 2019 notification says the following about interest payment:

"Interest shall be payable from the date of deposit to 31st March/30th June/30th September/31st December on first working day of April/July/October/January, as the case may be, in the first instance and thereafter interest shall be payable on first working day of April/July/October/January as the case may be."

Under SCSS, payments are always made after the completion of each quarter. Therefore, subsequent interest payments will be credited on the first working day of July, October, January, April, and so on.

At present, the SCSS interest rate is 8.2%.

Impact of SCSS interest rate hike or cut

This means:

⦁ If the finance ministry increases the SCSS interest rate, only new investors (or fresh deposits after account maturity/extension) will benefit from the higher rate.

⦁ Existing SCSS account holders continue to earn the interest rate that was in effect when they opened or extended their account.

So, if a senior citizen locks in their SCSS investment at 8.2% for five years, a later rate cut won’t affect their returns. Similarly, a hike won’t apply unless they reinvest after maturity.

The SCSS interest rate is fixed for the entire 5-year tenure once you invest, unlike schemes like PPF where the interest rate can change. So, any rate hike or cut only affects new investments or renewals made after the rate change, not the existing SCSS deposits.

⦁ If you invest ₹15 lakh in SCSS today at 8.2%, your interest rate is locked at 8.2% for 5 years, it won’t change even if the government raises or lowers the rate during that period.

⦁ However, if the government announces a rate hike to 8.7% tomorrow, only new deposits or renewals after that date will get the higher rate.

⦁ Similarly, if rates drop, existing SCSS accounts won’t be affected until maturity or renewal.

What should SCSS investors do?

Ahead of the announcement, SCSS account holders are expecting a hike in the interest rate from the current 8.2%. However, nothing can be confirmed at this time. The government may or may not increase the rate. The SCSS interest rate has remained unchanged at 8.2% since April 1, 2023. The scheme helps millions of senior citizens by providing a guaranteed income on deposit of a lump sum.

As an investor, you cannot control interest rate changes.

Further, balancing your SCSS investments with other options like equity mutual funds may help you generate better inflation-adjusted returns over the long term.