# Post Office Savings Account: 4% Rate, Rules & Tax in 2026

Most of us open a savings account at a bank and never think about it again. A quieter option sits a street away in the post office, and it works differently enough that the difference is worth knowing.

## The rate is set by the government, not by the market

The Post Office Savings Account (POSA) pays **4% a year**, and this rate is unchanged for the current quarter, **1 October to 31 December 2026**. The Finance Ministry revises small savings rates every quarter. The next revision falls on 31 December 2026.

There is no bank to compare offers with. Your rate is whatever the notification says for that quarter. That cuts both ways — you will not get a rate cut without asking, and you will not get a rate rise either.

## The rules that make this account different

**You can hold any amount.** The Scheme is explicit: "There shall be no maximum limit of deposit in an account." Some other small savings schemes carry a ceiling on aggregate deposits — this one does not. Every rupee earns interest.

**You get one single account, plus a joint one.** If a joint holder dies, you can keep the joint account running *only if* you do not already hold a single account in your own name. If you do hold one, the joint account has to be closed and the money paid out to you. It is not swept into your single account. You have to choose, not consolidate.

**Interest is calculated on your lowest balance between the 10th and the last day of each month.** Not your average. Not your closing balance. If you keep Rs 1,00,000 all month but dip to Rs 10,000 on the 12th, that whole month earns interest on Rs 10,000. Keep the money stable and this stops mattering.

**Interest is credited once a year, at the end of the financial year.** This is the single biggest difference from a bank account, where interest is usually credited quarterly or monthly. Your money earns interest every month, but you see it once a year, added to the balance you already have. "Year" here means the financial year, from 1 April.

**Below Rs 500, no interest at all.** Not reduced interest — none. If your balance dips below Rs 500 at any point between the 10th and the last day of any month, you lose interest for that entire month. Separately from that, interest is credited only on whole rupees, rounded to the nearest rupee, with 50 paise or more counted as one rupee.

**A Rs 50 fee if you fall below Rs 500.** This is an account maintenance fee, not a dormancy charge, and it is what will close your account. If you do not top your balance back up to Rs 500, a **Rs 50 fee inclusive of GST** is deducted on the last working day of each financial year. If the balance then falls to nil, the account closes automatically and you are notified. This applies to dormant accounts too.

**Withdraw from Rs 50.** Present the passbook with the withdrawal form. A withdrawal cannot take your balance below Rs 500.

**One cheque book of ten leaves a year, free.** After that, Rs 2 per leaf. The passbook itself carries no charge.

**You can close it today, with no penalty.** There is no lock-in, no notice period and no maturity to wait for. Hand over the passbook, any unused cheque book and the closure form. You get interest up to the end of the month before the month you closed it.

**Going quiet blocks your account.** No deposit or withdrawal for three complete years makes it a silent account, and transactions are blocked until you revive it. There is no dormancy fee, but reviving takes paperwork, and credit of interest does not count as reviving it.

## Nomination is not optional here

You **shall nominate** one or more individuals, up to four, on Form 10 at the time of opening. Note the word "shall" — this is a requirement in the Government Savings Promotion General Rules, 2018, not a suggestion.

You record each nominee's percentage share, and you state whether they receive the money as an absolute owner or as a trustee for your legal heirs. That choice matters: nominate as absolute owner and the nominee takes the money cleanly. Name them as trustee and the legal heirs can still come after the balance.

**Making a nomination is free, and so is changing or cancelling one.** The Rs 50 fee that used to apply was deleted in April 2025 — India Post's own fee schedule now reads "No fee applicable" for cancellation or change of nomination.

A nomination lapses if every nominee dies or the account is pledged as security. If you nominate a minor, you must appoint an adult to receive the money during the minority.

On death, the nominee files Form 11, and interest stops accruing at the end of the month before the month the account closes.

## Tax: the interest is taxable, and one ceiling is not the other

Two different numbers get mixed up here constantly, and confusing them costs you money.

**Your interest is taxable at your slab rate.** There is no exemption. The tax-free interest you get on PPF, SSY and NSC comes from section 11(1), Schedule II, Sl. No. 11 of the Income-tax Act, 2025, which covers only savings certificates and deposits that the Central Government has **notified**. A plain POSA is not in that notified set. Do not assume this interest is tax-free.

**The deduction ceiling is Rs 10,000.** Section 153, "Deduction for interest on deposits", covers deposits with a banking company, a co-operative society engaged in banking, or "a Post Office as defined in section 2(d) of the Post Office Act, 2023" — post offices are named, so the deduction reaches you.

- Non-senior individuals and HUFs: up to **Rs 10,000** on savings account interest, excluding time deposits.
- Senior citizens: up to **Rs 50,000** on deposits in any account, including time deposits.

At 4%, that Rs 10,000 runs out at a balance of **Rs 2,50,000**. Most holders never get there.

**The TDS threshold is much higher, and it is not Rs 10,000.** Under section 194A(3)(i)(c), as amended by the Finance Act, 2025 with effect from 1 April 2025, the threshold for post office deposits is **Rs 50,000** for individuals and HUFs, and **Rs 1,00,000** for senior citizens. If you have seen Rs 10,000 and Rs 5,000 quoted as "TDS limits" for post office interest, those are the old pre-2019 figures and they are dead.

At 4%, TDS starts biting at **Rs 12,50,000** for an individual or HUF, and **Rs 25,00,000** for a senior citizen — four to five times higher than where the deduction runs out.

One honest gap, and it is not worth guessing at. Whether any TDS is actually deducted on POSA interest depends on section 194A(3)(vi), which switches the section off for deposits under a scheme framed by the Central Government **and notified by it for this purpose**. India Post does not publish that list, and secondary sources disagree. Rather than tell you it works one way or the other, check your own annual TDS statement — it will show whether anything was actually deducted on this interest.

## So when does it beat a bank account?

**On the insurance question, there is no contest.** Bank deposits up to Rs 5 lakh are insured by the DICGC. **Post office deposits are not covered by DICGC.** Read the definition in section 2(g) of the DICGC Act, 1961: a "deposit" means unpaid balances due to a depositor with a banking company, a corresponding new bank, a regional rural bank or a co-operative bank. A post office is not in that list, and the Act registers banking companies and co-operative banks — nothing else. If you are choosing on deposit insurance alone, the bank account wins. The post office account is backed by the Government of India instead of an insurance guarantee.

Read our [DICGC deposit insurance guide](https://thewealthblog.in/dicgc-deposit-insurance-5-lakh-limit/) for how the bank cover works in detail.

**On the rate, banks usually win.** Savings rates at large banks have sat below 4% for years, but a good regional bank or a fintech often pays more — the banks that chased customers to open accounts have led on rate. Our [comparison of the best savings accounts in India](https://thewealthblog.in/best-savings-bank-accounts-in-india/) covers where the rates actually are. Interest is deregulated, and the [RBI's Master Direction on Interest Rate on Deposits](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11212) requires a bank to apply one uniform rate across all balances up to Rs 1 lakh, with banks free to pay a differential above that. Post office sits outside that regime entirely, which is the real difference: there is no bank nearby offering 4% on an account with no ceiling on deposits.

**On liquidity, they tie.** Your money is available whenever you want it, with no penalty, and no bank can hold it for a notice period.

**On what this page cannot tell you: operations.** Passbook downloads, password resets and passbook statements have their own guide at [POSA passbook download and password guide](https://thewealthblog.in/post-office-savings-account-rd-fd-passbook-download-password-guide/). This page deliberately does not repeat it.

## Where POSA genuinely fits

A [senior citizen](https://thewealthblog.in/scss-vs-bank-fd-senior-citizens/) whose interest genuinely qualifies for the full Rs 50,000 section 153 deduction. A family that wants unlimited deposits in a government-backed account with no rate risk from a bank's quarterly review, and who do not need DICGC cover on top. Someone who values the passbook and the counter relationship over an app. Someone who wants a fixed, visible rate they can plan against for years, because [PPF at 7.1%](https://thewealthblog.in/nps-vs-ppf-2026/) gets you more but asks for fifteen.

For everyone else, a bank savings account usually pays more and comes with DICGC cover.

## Your action today

Write down your current savings balance. At 4%, every Rs 1,00,000 in a POSA earns Rs 4,000 a year, credited once. Check whether the bank account paying you interest is above or below that, and check that the balance sits above Rs 500 from the 10th to the last day of every month.

Then fill in Form 10. It is free at opening and free to change later — and you can add one later too. But the account is meant to carry a nomination from day one, and adding one after the fact means a trip to the counter with your passbook.

## Sources

- Government Savings Promotion Act, 1873 (5 of 1873) — [consolidated text](https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=148), **as amended by chapter VIII of the Finance Act, 2018 and chapter V of the Finance Act, 2023** — the POSA is a listed scheme at **Schedule, Part A, item 1**; section 3A(3)(c) (manner of calculation, frequency of payment and rate of interest), 3A(3)(d) (maximum and minimum limits of deposit), 15(2)(c) (non-accrual of interest when maximum limits are exceeded)
- Post Office Savings Account Scheme, 2019 — GSR 921(E) dated 12.12.2019, amended GSR 257(E) dated 09.04.2021, made under section 3A of the Government Savings Promotion Act, 1873. Rules cited: 3(2), 4(1)–4(7), 5(1)–5(5), 7, 8, 9
- Government Savings Promotion General Rules, 2018 — GSR 1003(E) dated 05.10.2018, **as amended by GSR 214(E) dated 02.04.2025**, circulated as Department of Posts SB Order No. 05/2025 dated 03.04.2025, which deleted the fee for cancellation or change of nomination from Schedule II. Rule 14 (nomination), rule 15 (payment on death), Schedule I (Forms)
- Finance Ministry Office Memorandum No. 11412019-NS dated 30.09.2026, circulated as Department of Posts SB Order No. 12/2026 — rates for 1 October to 31 December 2026
- DICGC Act, 1961, consolidated text amended to August 2023 — section 2(g) and Chapter III (registration of insured banks)
- Income-tax Act, 2025 — section 153 (deduction for interest on deposits); section 194A(3)(i)(c) and 194A(3)(vi), as amended by the Finance Act, 2025 w.e.f. 01.04.2025; section 11(1), Schedule II, Sl. No. 11 (interest exemption)
- RBI Master Direction on Interest Rate on Deposits — uniform rate on savings balances up to Rs 1 lakh
- India Post, saving schemes fee schedule — current fees

*Three source notes, for anyone auditing this page.\* The 2018 General Rules as served by NSI still show the Rs 50 nomination fee in Schedule II; GSR 214(E) and India Post's current fee schedule are the correct sources for that line. The bare GSP Act should be read in a text **amended to 2023**, and even then printings differ: some carry an eight-item Part A, others break the certificate schemes out and run to ten. POSA sits at item 1 in both of those printings, so the citation is safe, but a reader opening a differently-vintaged text may find it elsewhere. And re-numbered printings of the Act circulate with identical wording under different labels. Each of these would otherwise leave a reader auditing from one URL looking at text that appears to contradict the body.*

*Interest rates and rules change. Check [India Post's savings schemes page](https://www.indiapost.gov.in/banking-services/savings) for the current notified rate before acting. This is for educational purposes only. Consult a qualified financial advisor for personalised advice.*