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The deduction comes from principal, not from all interest earned. Interest is payable through the day before closure, subject to the applicable deduction and the account’s actual interest records. Your exact payout depends on the deposit, opening date, closure date and interest already paid or credited.
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SCSS premature-closure penalties at a glance
The SCSS premature-closure schedule is based on how long the account has been open. The percentage applies to the deposit amount. It is not a charge calculated only on the interest.
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| When you request closure | Ordinary closure status | Deduction | Interest treatment |
|---|---|---|---|
| Before one year has elapsed | Ordinary premature closure is not allowed | Not applicable under the ordinary rule | Not applicable to an ordinary closure request |
| After one year but before two years | Allowed | 1.5% of the deposit | Payable through the day before closure, after the specified deduction |
| After two years but before the original five-year maturity | Allowed | 1% of the deposit | Payable through the day before closure, after the specified deduction |
| Extended account, after one year from the extension date | Allowed without the paragraph 6(1) deduction | No usual premature-closure deduction under that provision | Calculated from the account records through the applicable closure date |
| Death before maturity or extended maturity | Separate death-related closure and refund rules apply | Handled under the death provisions, not the ordinary age-band schedule | Scheme interest applies through the date of death; the Post Office Savings Account rate applies from death until final closure |
The controlling rules are in the Government of India’s Senior Citizens’ Savings Scheme rules. India Post’s consumer guidance also describes one year as the ordinary minimum holding period for an early closure.
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What the 1.5% or 1% deduction actually means
It is easy to read “1.5% penalty” as losing 1.5% of interest. That is not how the rule is written. The deduction is a percentage of the deposit (principal). Interest is a separate calculation and is payable up to the day before the account is closed, after applying the relevant deduction.
Use the deposit, not the interest, in the penalty calculation
For an account that has run for more than one year but less than two, the principal deduction is:
Deposit × 1.5% = deduction
For an account that has run for more than two years but less than five, it is:
Deposit × 1% = deduction
The principal remaining after the deduction is then combined with the interest payable under the account records. The final amount is not determinable from the penalty percentage alone because interest may already have been paid or credited during the account’s life.
Illustrative arithmetic
These examples show only the rule’s principal deduction; they are not payout quotations.
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- On a ₹10,00,000 deposit closed after 18 months, 1.5% is ₹15,000. The principal component after that deduction is ₹9,85,000, before adding the interest payable through the day before closure.
- On a ₹10,00,000 deposit closed after 30 months, 1% is ₹10,000. The principal component after that deduction is ₹9,90,000, before adding the applicable interest.
- On a ₹5,00,000 deposit closed after 15 months, 1.5% is ₹7,500. The calculation does not mean that all interest credited over those 15 months is automatically forfeited.
India Post’s digital closure flow displays the net amount payable, including any penalty, before submission. That displayed figure and your account statement are more reliable than a manual estimate.
Why the first year is a hard boundary
Under the ordinary SCSS rule, a holder cannot simply withdraw the account during the first year and pay a larger fee. The one-year period must expire before an ordinary premature closure is permitted. The relevant clock starts with the account opening date recorded by the post office or authorised bank.
Do not rely on the date you made an online request, the date interest was last credited or the date a passbook was updated. Ask the servicing office to confirm the opening date and the first date on which an ordinary closure request is eligible. A request submitted even slightly before the one-year point may be rejected because it falls into the prohibited period.
How interest is handled when you close early
The rule provides interest up to the day preceding premature closure, after the specified principal deduction. This creates three separate items for reconciliation:
- Original deposit: the principal placed in the SCSS account.
- Premature-closure deduction: 1.5% or 1% of that deposit, where the ordinary age-band rule applies.
- Interest payable: interest calculated through the day before closure, taking account of interest already paid or credited in the account’s records.
Consequently, an account statement may be needed to determine whether a period’s interest has already been credited, paid out or otherwise recorded. The rules do not support describing the outcome as “losing 1% of your interest.” They specify a deduction from the deposit and a separate interest cutoff.
What changes after an SCSS extension
An SCSS account may be extended once for three years by applying within one year after maturity. The original account’s five-year maturity and the extension period should be treated as distinct time periods for closure planning.
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If you want to close an extended account before one year has passed from the extension date, do not assume that the original 1% or 1.5% table automatically answers the question. The ordinary rule and the extension provision are different. Have the post office or bank confirm the applicable treatment for the exact extension and closure dates before submitting.
Death is treated separately
When an account holder dies before the original maturity or an extended maturity, the SCSS rules provide a separate closure and refund route. The nominee or legal heirs can receive the deposit with scheme interest applicable through the date of death. From the date of death until the account is finally closed, the deposit earns interest at the Post Office Savings Account rate.
When a spouse may continue the account
For a joint account, or where the spouse is the sole nominee, the surviving spouse may be able to continue the account on SCSS terms if the spouse meets the eligibility requirement on the date of death. Continuation is not automatic for every survivor: the account structure, nomination and the spouse’s eligibility must be checked with the servicing institution.
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Because death-related interest and documentation differ from an ordinary voluntary closure, the nominee or heirs should notify the post office or bank promptly and ask which death claim and continuation documents are required.
How to request an early closure
DOP Internet Banking route
A Department of Posts order dated 27 August 2024 describes an online route for eligible accounts through DOP Internet Banking. The labels in that order are:
- Sign in to DOP Internet Banking.
- Open General Services.
- Select Service Requests, then New Requests.
- Choose Closure / Pre-Closure of SCSS Accounts.
- Select the SCSS account to be closed.
- Select the linked Post Office Savings Account into which the proceeds should be credited.
- Review the displayed net amount payable, including any penalty, and submit the request.
The 2024 order documents this channel and its menu path. Digital availability, account eligibility and authentication requirements can change, so check the current options shown in your account or confirm with the post office before relying on the online route.
At a post office or bank
If you are using an in-person channel, contact the branch or post office where the account is serviced and ask for its current SCSS premature-closure procedure. Take identification, account details and the bank or Post Office Savings Account information needed for crediting the proceeds. The institution can verify the opening or extension date, determine the correct penalty band and reconcile interest already credited.
Ask for a written or on-screen calculation showing the deposit, the percentage deduction, interest through the day before closure and the final net amount. This is especially important when the account has received periodic interest payments or when the requested closure date is close to the one-year or two-year boundary.
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Checks to make before submitting
- Confirm the elapsed period: compare the proposed closure date with the account opening date, or with the extension date for an extended account.
- Identify the correct rule: first-year requests are ordinarily unavailable; one-to-under-two years uses 1.5%; two-to-under-five years uses 1%.
- Separate principal and interest: verify that the percentage has been applied to the deposit and that interest is shown separately.
- Review prior credits: compare the institution’s calculation with passbook or account-statement entries.
- Choose the receiving account: for the DOP online flow, select the linked Post Office Savings Account shown by the system.
- Consider an extension: if the account has already been extended, check whether one year has elapsed from the extension date.
- Use the death route where applicable: nominees, legal heirs and eligible spouses are not processed under the ordinary voluntary-closure schedule.
Current SCSS interest-rate context
India Post’s savings listing showed an SCSS rate of 8.2% per annum when checked in 2026. Interest rates are time-sensitive and should be reconfirmed before you make a closure decision. That rate does not alter the separate premature-closure deductions of 1.5% and 1% set out above.
Do not multiply 8.2% by the deposit and assume the result is your closure proceeds. The applicable rate for the relevant periods, the dates on which interest was credited and the institution’s account records determine the actual interest component.
Common mistakes and how to avoid them
Calling the deduction an interest forfeiture
This misstates the rule. Use “1.5% of the deposit” or “1% of the deposit,” then discuss interest separately.
Applying the 1% band too early
The lower deduction begins only after two years have elapsed. A closure after one year but before two years remains in the 1.5% band.
Ignoring the extension date
An extended account has a new one-year reference point for the no-deduction condition. Looking only at the original opening date can produce the wrong answer.
Assuming a quoted payout is universal
Two accounts with the same deposit can receive different net amounts if their opening dates, closure dates or interest-credit histories differ. Use the institution’s displayed or written calculation for the specific account.
Bottom line for an early SCSS withdrawal
You can ordinarily close an SCSS account only after it has completed one year. Close it after one year and before two years and 1.5% of the deposit is deducted; close it after two years and before the original five-year maturity and 1% is deducted. Interest is payable through the day before closure under the account records. Extended accounts and death-related closures follow separate provisions, so verify the dates and the net amount with the servicing institution before submitting.
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