Post Office Savings Account: How are POSA accounts affected by interest rate changes?

A change in the Post Office Savings Account (POSA) interest rate typically does not affect existing deposits. However it will affect new deposits and new accounts opened after the rate change.

As the Finance Ministry is expected to announce the POSA interest rate for the October-December quarter of FY 2025-26 on Wednesday, September 30, 2025, here’s a look at how an interest rate change impacts post office savings account holders.

How does the Post Office Savings Account interest rate work?

The Finance Ministry declares the Post Office Savings Account interest rate every quarter. The scheme is popular among small savers.

Who can open a Post Office Savings Account (POSA)?

⦁ A single adult

⦁ Two adults (either Joint A or Joint B)

⦁ A guardian on behalf of a minor

⦁ A guardian on behalf of a person of unsound mind

⦁ A minor above 10 years, in their own name

Please note, an individual can open only one savings account in the post office.

Interest rate: 4% per annum

Minimum amount for opening account: ₹500

Maximum balance: There is no maximum balance limit for a POSA.

All deposits and withdrawals must be made in whole rupees.

Minimum deposit amount: ₹500 (subsequent deposits must be at least ₹10 each).

Minimum withdrawal amount: ₹50

Maximum deposit: No maximum deposit limit.

Minimum balance requirement: If the balance falls below ₹500, withdrawals will not be permitted until the balance is restored to the required minimum.

Interest calculation: Interest is calculated based on the minimum balance between the 10th and the last day of the month and is credited in whole rupees only.

No interest: If the balance falls below ₹500 at any point between the 10th and the last day of the month, no interest will be credited for that month.

Interest credit: The interest accrued in a POSA is credited to the account at the end of each financial year.

Closure of account: Interest will be paid up to the preceding month in which the account is closed.

Section 80TTA of the Income Tax Act: Interest earned up to ₹10,000 in a Financial Year from all Savings Bank Accounts (including POSA) is exempt from taxable income.

What this means for you

Ahead of the small savings scheme interest rate announcement, post office savings account holders are expecting a hike in the interest rate. However, nothing can be confirmed at this time.