Post Office FD vs Bank FD: Which Is Better in 2026?

A Post Office Time Deposit (POTD) is a government savings scheme; a bank FD is a bank liability insured up to a limit. On the rate cards we checked, the POTD pays more than two of India's largest banks at every common tenor. But banks differ, and the better answer depends on tenor, deposit size, age and tax slab. This guide compares the numbers and gives a way to decide.

Rate Comparison by Tenor

SBI's page was last updated on 16 June 2026 with the 15 December 2025 card rates, so check for a later revision. HDFC's 5-year row is its 4 years 7 months 1 day to 5 years bucket. Other banks, especially small finance banks, may pay more than both, but they are also covered only by the same ₹5 lakh deposit insurance, so read each bank's own page and compare tenors exactly.

What ₹5 Lakh Earns

On the 5-year deposit the POTD earns about ₹38,000 to ₹50,000 more than these two banks on ₹5 lakh. One caveat: a POTD computes interest quarterly but pays it out once a year, so the compounding shown is only achieved if you reinvest the payout at the same rate. Banks offer cumulative FDs that compound inside the deposit.

Safety: Government Scheme vs Deposit Insurance

Post office schemes are Government of India savings schemes, so repayment is a government obligation. A bank FD is insured by DICGC up to ₹5 lakh per depositor per bank, counting principal and interest together across all branches. The cover applies separately at each bank and in each ownership capacity, such as single or joint. For larger sums, spreading deposits across banks keeps each within the cover.

Tax and TDS

• Interest on both is taxable at your slab rate. The 5-year POTD and the 5-year bank tax-saver FD both qualify for the 80C deduction under the old regime only; see the tax-saver FD guide.
• TDS at 10% is deducted when interest from one bank, or the post office, crosses ₹50,000 in a financial year (₹1,00,000 for senior citizens) since 1 April 2025. The limit is per bank, across its branches. TDS applies without a PAN at a higher rate, so keep your PAN linked.
• Form 15G (below the limit and nil tax) or Form 15H (senior citizens) can stop TDS where you are eligible. TDS only prepays tax: interest below the threshold is still taxable income and must be reported in your return.

Early Withdrawal and Seniors

A Post Office TD cannot be withdrawn in the first six months. Between six months and one year it pays savings-account interest, and from year one on a 2, 3 or 5-year account the rate drops by 2 percentage points below the applicable TD rate. Banks set their own early-exit penalties, so check the bank's terms. Banks also pay senior citizens an extra margin (SBI and HDFC both show 0.50 percentage points on the pages above), which the POTD does not. Seniors should compare the SCSS against bank FDs before choosing.

Decision Framework

• 3 to 5 years, any size, regular investor: POTD first, since on the rate cards above it pays more and has no ₹5 lakh insurance cap to manage.
• Bank deposits over ₹5 lakh: split across banks, so no single bank holds more than the insured amount.
• Need monthly income: compare the Post Office Monthly Income Scheme with a bank payout FD; see the POMIS guide.
• May need the money early or in under 1 year: a bank FD with a clear premature-withdrawal rule, or a laddered FD plan, is more flexible.
• Senior citizen: the bank margin can close the gap, so compare after-tax; also see the POTD guide.