Post Office Savings Account 2026: Interest Rate, Rules, and the Tax Break Most People Miss

By Nitish Bharadwaj · Published Jul 22, 2026 · 6 min

The Post Office Savings Account pays a flat 4% per annum, unchanged for years, with no minimum balance unless you opt for a cheque book (then ₹500). Up to 3 adults can hold it jointly, and minors above 10 can operate one independently. Its real advantage is tax: post office savings interest gets a Section 10(15)(i) exemption of ₹3,500 (single) or ₹7,000 (joint) — on top of the usual ₹10,000 Section 80TTA deduction, and unlike 80TTA, this exemption survives the new tax regime too.

The Post Office Savings Account is the oldest deposit product in the country — older than most of the banks that now compete with it — and its 4% interest rate hasn't moved in years while small finance banks dangle 7%+ promotional rates to pull in deposits. Judged purely on rate, it looks unremarkable. But most people never look past the rate, and in doing so they miss the one thing this account actually does better than a bank savings account: a separate tax exemption that survives even the new tax regime, stacked quietly on top of the usual savings-interest deduction. Here's what the account actually offers, and the tax mechanic worth knowing before you write it off as a low-rate relic.

Interest Rate — Where It Stands in 2026

The Post Office Savings Account (POSA) currently pays 4% per annum, calculated on the minimum balance between the 10th and last day of the month and credited annually. This rate is set by the government alongside other small savings schemes and reviewed quarterly, but it has stayed unchanged at 4% for several years running — unlike POMIS, NSC, or SCSS, which move with G-Sec yields each quarter.

On rate alone, several small finance banks and digital savings accounts now beat the post office outright — our best high-interest savings accounts guide ranks the current leaders. What POSA offers instead is sovereign backing with zero deposit-insurance ambiguity, universal access even in areas without a bank branch, and — as covered below — a tax treatment banks can't match.

Minimum Balance, Cheque Book, and ATM Rules

• No minimum balance is required if you don't opt for cheque book facility on the account
• Once you opt for a cheque book, a minimum balance of ₹500 must be maintained — falling below it can attract a nominal penalty or account restrictions
• A passbook is issued and must be updated periodically at the branch, or via post office ATMs and the India Post Payments Bank (IPPB) app in select circles
• An ATM-cum-debit card (RuPay) is available on request, with a daily ATM withdrawal limit and a per-transaction cash withdrawal cap — check your circle's current limits, as post office ATM networks are smaller and less ubiquitous than bank ATM networks
• Linking the account to IPPB enables mobile banking, UPI payments, and fund transfers — bringing it close to bank-account convenience for day-to-day use; note that IPPB itself is a separate payments bank with its own lower interest rate and a ₹2 lakh balance cap — see our India Post Payments Bank guide for how the two accounts actually work together

Who Can Open One — Joint Holders, Minors, and NRIs

• Individuals can open a single account, or a joint account with up to 3 adults
• A guardian can open and operate an account on behalf of a minor; a minor above 10 years of age can open and operate an account independently
• Nomination is available and strongly recommended — without it, proceeds go through the legal succession process on the account holder's death; if you're also holding fixed deposits, note that FD nomination rules changed in late 2025 — see our FD nomination rules guide for what's different now
• NRIs cannot open a new Post Office Savings Account; an account must be closed or appropriately converted once the holder's residential status changes to NRI

The Tax Break Most People Miss

Every savings account, bank or post office, gets Section 80TTA: a deduction of up to ₹10,000 a year on savings interest, combined across every bank and post office account you hold, for taxpayers under 60 (senior citizens use Section 80TTB instead, capped at ₹50,000 and covering FD/RD interest too — see our 80TTA vs 80TTB guide for the full comparison). What almost nobody accounts for is that post office savings account interest carries a second, separate exemption under Section 10(15)(i): up to ₹3,500 a year is exempt on a single account, and up to ₹7,000 on a joint account.

In practice, the numbers are modest — nobody is building a tax strategy around ₹3,500 of exempt interest — but for taxpayers who keep an emergency fund or float cash anyway, routing a slice of it through a post office savings account captures relief that a bank account of the same size simply doesn't offer, under either regime.

How to Open a Post Office Savings Account

1. Visit your nearest post office with PAN, Aadhaar, and a passport-size photograph, or check whether IPPB account opening is available digitally in your area
2. Fill the account opening form (Form SB-1 or the applicable KYC form) and choose single or joint holding
3. Make the initial deposit — a nominal amount is sufficient if you skip the cheque facility; opt for cheque book only if you're comfortable maintaining the ₹500 minimum balance going forward
4. Add a nominee at account opening — this can be changed later, but should never be left blank
5. Link the account to IPPB for mobile banking and UPI, and collect your passbook and, if requested, an ATM-cum-debit card

For most households, a post office savings account works best as a secondary, low-friction place to park a portion of idle cash or an emergency fund — not as a primary transaction account. If your priority is maximising interest on a large balance, compare it against the Post Office Time Deposit or a Post Office Recurring Deposit instead, both of which pay meaningfully more for money you can commit to a fixed tenure. And if TDS on other post office or bank deposits is a concern, our Form 15G/15H guide covers how to avoid unnecessary withholding.