Post Office FD Rates Q3 FY26: 7.5% for 5 Years – How to Invest
You walk into a post office to buy stamps. But the queue is for something else — a fixed deposit. The Post Office Time Deposit, or simply the post office FD, is one of India's oldest savings tools. And right now, it pays more than many bank FDs.
- Post Office FD (Time Deposit) interest rates are set by the Ministry of Finance every quarter, not by RBI.
- For Q3 FY26 (October–December 2026), the highest rate is 7.5% per annum for a 5-year tenure.
- The 1-year Post Office FD pays 6.9% per annum, the 2-year pays 7.0%, and the 3-year pays 7.1%.
- Minimum deposit is ₹1,000; no maximum limit. Interest is compounded quarterly but paid annually.
- Premature withdrawal before 1 year yields no interest; after 1 year, interest is paid at the completed-tenure rate minus a penalty of 0.5% to 1%.
- Post Office FD rates are set quarterly by the government, not by RBI.
- Current highest rate is 7.5% for 5 years (Q3 FY26).
- Minimum deposit is ₹1,000; no maximum limit.
- Interest is taxable; TDS applies above ₹40,000 interest per year.
- Premature withdrawal is allowed with a penalty of 0.5% to 1%.
What Are Post Office FD Rates?
The Post Office Time Deposit (TD) is a fixed deposit scheme offered by India Post. The government announces interest rates every quarter. For Q3 FY26 (October to December 2026), the rates are:
- 1 year: 6.9% per annum
- 2 years: 7.0% per annum
- 3 years: 7.1% per annum
- 5 years: 7.5% per annum
These rates are fixed for the quarter. They do not change with RBI's repo rate decisions. The 5-year deposit also qualifies for tax deduction under Section 80C of the Income Tax Act.
How Do Post Office FD Rates Compare to Bank FDs?
Bank FD rates change frequently — often after every RBI monetary policy meeting. Post office FD rates change only once a quarter. Currently, the 5-year post office FD at 7.5% is higher than most bank FDs for the same tenure. For example, SBI's 5-year FD pays around 6.5% to 7.0% depending on the amount. But bank FDs offer more flexibility — you can choose monthly or quarterly interest payouts. Post office FDs pay interest annually, which means you get the full interest only at the end of each year.
If you want to understand how the repo rate affects bank FDs, read our explainer on Repo Rate Cut to 6.50%: How It Lowers Your Loan EMI and FD Returns.
Who Should Invest in a Post Office FD?
Post office FDs are ideal for:
- Risk-averse investors: The government guarantees the principal and interest.
- Senior citizens: No extra rate, but the safety is unmatched.
- Small savers: Minimum ₹1,000 to start.
- Tax planners: The 5-year deposit qualifies for Section 80C deduction up to ₹1.5 lakh per year.
But if you need monthly income, a bank FD or a post office Monthly Income Scheme (MIS) might be better.
How to Open a Post Office FD Account
You can open a Post Office Time Deposit account at any India Post office. Here's what you need:
- Documents: Aadhaar card, PAN card, and a passport-size photo.
- Minimum deposit: ₹1,000. You can deposit in multiples of ₹100.
- Account type: Single or joint.
- Nomination: Mandatory for deposits above ₹5,000.
The account can be opened in the name of a minor (above 10 years) or a major. For minors below 10, a guardian operates it.
Premature Withdrawal and Penalty
You can withdraw your post office FD before maturity, but there is a penalty:
- Before 1 year: No interest is paid. Only the principal is returned.
- After 1 year but before maturity: Interest is paid at the rate applicable for the completed tenure, minus a penalty of 0.5% to 1%.
For example, if you withdraw a 5-year FD after 2 years, you get interest at the 2-year rate (7.0%) minus 0.5% penalty = 6.5% per annum for the 2 years.
Tax on Post Office FD Interest
Interest earned on post office FDs is taxable under 'Income from Other Sources'. TDS (Tax Deducted at Source) is deducted if the total interest exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). The post office deducts TDS at 10% if you have provided your PAN. Without PAN, TDS is deducted at 20%.
You can submit Form 15G or 15H to avoid TDS if your total income is below the taxable limit.
How Post Office FD Rates Are Set
The Ministry of Finance announces interest rates for all small savings schemes — including Post Office FD, PPF, Sukanya Samriddhi Yojana, and Senior Citizens' Savings Scheme — every quarter. The rates are linked to the yields on government securities (G-secs) of comparable maturity. If G-sec yields rise, small savings rates may rise. If they fall, rates may fall.
For the latest Sukanya Samriddhi Yojana rate, see our guide: Sukanya Samriddhi Yojana Interest Rate: 8.2% for Q3 FY26 – Full Guide.
Post Office FD vs PPF vs Sukanya Samriddhi Yojana
All three are government-backed small savings schemes. Here's how they differ:
- Post Office FD: 1 to 5 years. Interest paid annually. No upper limit. Taxable interest.
- PPF: 15-year lock-in. Interest compounded annually. Tax-free interest. Maximum ₹1.5 lakh per year.
- Sukanya Samriddhi Yojana: For girl child. 21-year lock-in. Interest compounded annually. Tax-free. Maximum ₹1.5 lakh per year.
If you want a short-term safe investment, post office FD is better. For long-term tax-free growth, PPF or Sukanya Samriddhi Yojana are better.
Questions people ask
For Q3 FY26 (October–December 2026), the 5-year Post Office Time Deposit pays 7.5% per annum. This rate is fixed for the quarter and may change next quarter.
Yes, you can open a Post Office FD account online through the India Post Payments Bank (IPPB) mobile app or the India Post website. You need an Aadhaar-linked mobile number and a savings account with IPPB.
Both are very safe. Post office FDs are backed by the Government of India. Bank FDs are insured by DICGC up to ₹5 lakh per depositor per bank. For amounts above ₹5 lakh, post office FDs are safer because there is no insurance cap.
If you withdraw before 1 year, no interest is paid. After 1 year, interest is paid at the rate for the completed tenure minus a penalty of 0.5% to 1%. The exact penalty depends on the scheme rules.
Yes, you can take a loan of up to 90% of the deposit amount from the post office. The loan interest rate is 2% above the FD rate. You can also pledge the FD as collateral for a loan from a bank.
No. Post office FD rates are set by the Ministry of Finance every quarter. They are linked to government securities yields, not the repo rate. Bank FD rates, however, often change with the repo rate.