SCSS Premature Closure Penalty and Extension Rules

The Senior Citizens Savings Scheme runs for 5 years and can be kept going in 3-year blocks after that. You can also close it early at any time, but the post office or bank deducts a penalty that depends on how long the account has run. This guide gives the exact slabs, the extension window, the forms, and what happens if you do nothing at maturity.

These slabs come from paragraph 6 of the Senior Citizens' Savings Scheme, 2019, which governs every SCSS account at post offices and authorised banks.

In every premature-closure case, interest is payable up to the day before closure, after the deduction above. On the death of the account holder the account is closed with interest up to the date of death and no premature-closure slab applies to the family's refund.

The Senior Citizens Savings Scheme (SCSS) is a government savings product. It is opened at a post office or an authorised bank, runs for 5 years, and pays interest every quarter, credited on the first working day of April, July, October and January. The rate for the July to September 2026 quarter is 8.2% per year, and the Finance Ministry reviews small savings rates every quarter, so confirm the live rate before you deposit. See the current quarterly small savings rate table for all schemes.

The maximum deposit across all your SCSS accounts is ₹30 lakh. The ceiling was raised from ₹15 lakh with effect from 1 April 2023. A husband and wife who are each eligible can hold ₹30 lakh in separate accounts each.

Per the Senior Citizens' Savings Scheme, 2019:

1. An individual who has attained the age of 60 years on the date of opening can open an account.
2. A person aged 55 or more but less than 60 who has retired on superannuation or otherwise, including on a voluntary retirement scheme, can open one within 3 months of receiving the retirement benefits, with the employer's certificate and proof of the date the benefits were paid. For this group, the deposit is capped at the retirement benefits received or ₹30 lakh, whichever is lower.
3. Retired Defence Services personnel, excluding civilian defence employees, can open from age 50.
4. You may open an account jointly with your spouse; the age of the first holder decides eligibility, and the whole deposit counts as the first holder's.

If you are still choosing an account, the SCSS account opening guide covers the documents and the branch route.

The account matures after 5 years from the date of opening. You may extend it for a further block of 3 years. There are five things to get right:

1. Apply in Form-4 within one year of maturity. If the counter does not recognise the number, ask for the SCSS extension application.
2. The extension runs from the date of maturity, not from the date you apply, whenever within the one-year window you apply.
3. You can extend more than once. A November 2023 amendment allows extension in further 3-year blocks, with a fresh Form-4 within one year of the end of each block. Before that amendment only one extension was allowed.
4. The extended account earns the SCSS rate applicable on the date of maturity, not the rate on the date you apply. For a later block, the rate is the one applicable on the date the previous block ended.
5. Do not leave a matured account idle. If you neither extend nor close it, the deposit earns only the Post Office Savings Account rate, 4% per year at present, from maturity onwards, not the SCSS rate. Decide and act.

One extension application extends by one 3-year block. After the first extension the account runs to 8 years from opening, and further blocks add 3 years each.

You can close an SCSS account before maturity at any time. The application is made in Form-2 at the post office or bank where the account stands. The penalty slabs are the ones in the table above: interest recovered from the deposit if closed before 1 year, 1.5% of the deposit deducted after 1 year but before 2 years, and 1% deducted on or after 2 years.

For an account that has already been extended, the closure rule is different: closing within 1 year of the date of extension costs 1% of the deposit, and closing on or after 1 year of the extension costs nothing. The November 2023 amendment introduced the 1% deduction for closure within the first year of an extension.

The same statutory scheme governs post offices and authorised banks, so the slabs are the same at both. Ask the official to show you the exact deduction in writing before you sign.

1. Decide before maturity. Mark the 5-year maturity date. For extension you have a one-year window from that date.
2. Visit the branch. Go to the post office or bank where the account is held. Both actions are done at the home branch.
3. For extension, fill Form-4. Submit it within one year of maturity and keep the stamped acknowledgement.
4. For early closure, fill Form-2. For closure at maturity or after an extension, the form is Form-3.
5. Carry your documents. Take the passbook, identity proof, and the account holder in person.
6. Get the penalty in writing. For early closure, ask the official to show you the exact deduction before you sign, so there are no surprises.
7. Collect the proceeds. The balance after any deduction is paid to your linked account or by the branch method you choose.

• SCSS passbook
• Identity proof (Aadhaar, PAN or other accepted proof)
• The correct form: Form-4 for extension, Form-2 for premature closure, Form-3 for closure at maturity
• Account holder present in person at the home branch

• Missing the one-year extension window. Apply in Form-4 within one year of maturity, or you lose the chance to extend that term.
• Closing just before a slab changes. Waiting a few weeks to cross the 1-year or 2-year mark can change your outcome from full interest recovery to a small percentage deduction.
• Assuming you can extend only once. Since November 2023, you can extend in 3-year blocks more than once, but each block needs its own Form-4 within one year of the previous block ending.
• Assuming the extension earns today's rate. The extended account earns the rate applicable on the date of maturity, or on the date the previous block ended for later blocks.
• Assuming an old rate. SCSS interest is reset every quarter. The rate on a fresh deposit is the rate notified for that quarter.
• Leaving a matured account idle. A matured account that is neither extended nor closed earns only the Post Office Savings Account rate, 4% per year at present, not the SCSS rate. Extend it or close it.

Suppose a retired teacher in Pune deposits ₹15,00,000 in SCSS. After 1 year and 6 months she needs the money for a medical bill. Because the account has run more than 1 year but less than 2 years, the deduction is 1.5% of the deposit, which is ₹22,500. Interest for the quarters she held the account was already paid to her, and interest runs up to the day before closure. She receives her deposit minus ₹22,500. Had she waited 6 more months to cross the 2-year mark, the deduction would have dropped to 1% of the deposit, ₹15,000. Always ask the branch to compute the exact figure for your account before you sign.

On the death of the account holder, the account is closed and the deposit is refunded, with interest at the SCSS rate up to the date of death, to the nominee or legal heirs, on an application in Form-3 with the death certificate. After the date of death, the balance earns only the Post Office Savings Account rate until final closure.

Two special cases: if it was a joint account with the spouse, or the spouse is the sole nominee, the spouse may continue the account on the same terms if they meet the eligibility conditions on the date of death. And where both spouses had separate accounts, the deceased spouse's account cannot be continued by the survivor; it is closed and refunded.

Start in writing: give the branch a written request and keep the stamped copy. For post offices, escalate to the postmaster in charge, then to the Chief Postmaster General of your circle or through the grievance option on the India Post website. For banks, escalate to the branch manager, then the bank's nodal grievance officer, and the RBI Integrated Ombudsman after a 30-day wait or a rejected complaint.

An RTI application is a separate tool: it cannot order the branch to pay, but it forces a written, time-bound reply about your file. It applies cleanly to post offices; for banks it depends on whether the bank is a public authority. For a ready-made SCSS application see the SCSS RTI guide, and for the full method see The RTI Playbook. If the closure was done but the money never arrived, the maturity amount not credited walkthrough lists the exact escalation steps.

Yes. Since the November 2023 amendment to the Senior Citizens' Savings Scheme, 2019, an account can be extended in further blocks of 3 years, with a fresh Form-4 within one year of the end of each block. Before that amendment, extension was available only once.

Interest already paid on the deposit is recovered from the deposit, and only the balance is paid to you. So you effectively get back your own money, minus the interest that was credited.

An amount equal to 1.5% of the deposit is deducted on premature closure after 1 year but before 2 years from the date of opening.

An amount equal to 1% of the deposit is deducted if you close on or after 2 years from the date of opening. This is lower than the 1.5% slab for the 1-to-2-year period.

Form-4, submitted at the post office or bank where the account stands, within one year from the date of maturity. Ask the branch for the current form and keep your stamped acknowledgement.

Form-2 is the premature closure application under the Senior Citizens' Savings Scheme, 2019. It is available at the post office or bank counter. Closure at maturity, or after an extension, is done on Form-3.

Yes. If you close within 1 year from the date of extension, 1% of the deposit is deducted. On or after 1 year from the date of extension, the account can be closed without any deduction.

The SCSS rate applicable on the date of maturity. For a later block, the rate applicable on the date the previous block ended. It is not the rate on the date you apply for the extension.

The account keeps standing, but the deposit earns only the Post Office Savings Account rate, 4% per year at present, not the SCSS rate, and you can close it at any time. Extend it if you want the SCSS rate to continue.

8.2% per year for the July to September 2026 quarter, unchanged from the previous quarter. The Finance Ministry reviews small savings rates every quarter, so check the latest notification or ask your branch before depositing.

The account is closed and the deposit, with interest up to the date of death, is paid to the nominee or legal heirs on Form-3 with the death certificate. A joint-holder spouse or sole-nominee spouse may continue the account if eligible.

₹30 lakh across all your SCSS accounts, raised from ₹15 lakh with effect from 1 April 2023. Both spouses, if each is eligible, can separately hold up to ₹30 lakh each.

Mark your maturity date now. If you want to continue, file Form-4 within one year of maturity, and again within one year of the end of each 3-year block you add. If you need the money sooner, ask the branch for the exact deduction in writing before you close, so you can time it past the next slab if that saves you money. Keep your passbook and every stamped acknowledgement safe.

• Senior Citizens' Savings Scheme, 2019 (notified vide G.S.R. 916(E) dated 12 December 2019, as amended) — National Savings Institute, Ministry of Finance: https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=168
• Senior Citizens Savings Scheme Rules, 2004 (the earlier rules, for history) — National Savings Institute: https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=134
• Post Office Saving Schemes — India Post, Department of Posts: https://www.indiapost.gov.in/banking-services/savings
• Senior Citizens Savings Scheme FAQ — State Bank of India: https://sbi.bank.in/web/faq-s/faq-scss
• Current quarterly rates on this site: https://righttoinformation.wiki/small-savings-interest-rates-july-september-2026