SCSS vs Senior Citizen FDs: Which is better for retirement corpus?

Senior Citizens Savings Scheme (SCSS) and Fixed Deposits (FD) are two of the most popular options for senior citizens seeking safer ways to park their retirement corpus.

SCSS is a small savings scheme backed by the Government. It offers a higher interest rate, a quarterly payout, and tax deduction under the Old Tax Regime. Currently, SCSS is offering 8.2% interest to senior citizens. The tenure of investment under this scheme is 5 years and can be extended for 3 more years upon maturity.

Fixed deposits are another low-risk investment option for senior citizens. Most banks offer higher interest on FDs to senior citizens than general citizens. Usually, banks offer an additional 0.50% to senior citizens on fixed deposits.

Here is a comparison of both of these instruments in terms of their interest rate, tax benefits, deposit limit, safety, and more for parking the retirement corpus.

Senior Citizens Savings Scheme

The government announces the interest rate for SCSS quarterly. For the first quarter of 2025-26 (FY26), the rate of interest is at 8.2% per annum. This interest rate is higher than most of the banks’ FDs. The interest on SCSS is payable every quarter and is completely taxable.

SCSS qualifies for tax deduction under Section 80C up to ₹1.5 lakh. However, this deduction is available only under the old tax regime. From the financial year 2025-26, TDS is applicable if the annual interest earned from SCSS exceeds ₹1 lakh. Senior citizens can avoid paying TDS by submitting Form 15H if their total income is below the basic exemption limit.

The upper limit of deposits under SCSS is ₹30 lakh per individual, and they mature after five years. However, you can extend an SCSS account for three more years.

Fixed deposits

Compared to SCSS, most of the large banks, including banks like SBI, HDFC Bank, ICICI Bank etc., offer low interest on FDs to senior citizens. In terms of taxation, TDS applies on interest above ₹1 lakh from FY 2025-26. However, senior citizens having income below the basic exemption limit can avoid paying TDS by submitting Form 15H at the start of the financial year.

Interest rates on FDs vary from bank to bank.

The following are the interest rates of the top 15 Indian banks on FDs of 5 years or more:

Bank FDs are also covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance up to ₹5 lakh per depositor per bank, including both principal and interest. While there is no upper limit for FDs, deposits above ₹3 crore offer varied interest rates.

Which is better for parking the retirement corpus?

In terms of safety and guaranteed returns, SCSS is a better option as it is directly backed by the sovereign guarantee of the Government of India. Any amount that you invest in SCSS is backed by this guarantee.

Some small banks offer higher interest rates for short tenures. However, only up to ₹5 lakh is insured by DICGC per customer per bank.

One can invest only ₹30 lakh in SCSS, whereas FDs have no limit. But for safety, it is advised not to have more than ₹5 lakh in a bank, especially small banks.

SCSS offers several advantages over fixed deposits in banks. However, consulting a financial advisor is essential to optimise one's retirement corpus effectively.