Senior Citizen Savings Scheme (SCSS): Taxation In New And Old Regimes

Senior Citizen Savings Scheme (SCSS) is a well-known savings scheme for senior citizens in India. The scheme allows investors to invest a minimum of Rs 1,000 and a maximum of Rs 30 lakh. The scheme pays a guaranteed interest every quarter, which is credited to the customers’ accounts on April 1, July 1, October 1, and January 1 of every year. While tax deducted at source (TDS) is deducted if the interest amount exceeds the prescribed limit, which is Rs 50,000 as of now and will be Rs 1 lakh from the next financial year 2025-26, from April 1, 2025.

In Budget 2025, Finance Minister Nirmala Sitharaman gave a huge relief to seniors by increasing the TDS threshold for seniors to Rs 1 lakh on deposits. As of now, the threshold is Rs 50,000, and if the interest from deposits becomes more than this, TDS is deducted from the deposits. However, if a senior does not fall in the taxable category, and tax has been deducted, a refund of this amount can be claimed while filing the income tax return (ITR). 

However, the better way is to submit Form 15H. Seniors can submit this Form to the bank or post office if they don’t fall in the taxable category and don’t want TDS to be deducted from their deposits.

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Here are the taxation rules for SCSS under both, the old and new tax regimes.

Taxation Under The Old Tax Regime:

Currently, SCSS is one of the highest paying guaranteed income schemes for seniors, providing 8.2 per cent annual interest, where they can even claim tax benefits on a deposit amount of up to Rs 1.50 lakh. This deduction is available only under the old tax regime under Section 80C of the Income-tax Act, 1961.

Even if they invest the maximum limit allowed, Rs 30 lakh, the tax benefit is available for a maximum of Rs 1.5 lakh. Given there is no other investment made under the 80C category.

Notably, the old tax regime offers another tax deduction on interest under Section 80TTB, for interest income of up to Rs 50,000.

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Taxation Under The New Tax Regime:

There is no tax benefit on SCSS deposits under the new tax regime, neither on deposit nor the interest amount. Further, the tax deduction under Section 80TTB is also not available in the new tax regime.

Taxation In The New Tax Regime After Budget 2025:

The Finance Bill 2025 has introduced a new tax regime, making income up to Rs 12 lakh tax-free for individuals. Starting from financial year 2025-26, this change would mean that senior citizens with a total income of up to Rs 12 lakh, including income from SCSS, will not be required to pay any taxes. Thus, the interest income within this limit will also not be taxable.