Post Office savings schemes

NOTIFICATION NO. 32/2011 DATED 3-6-2011 the govt levied tax on the interest obtained on Post Office savings schemes , if the interest earned on particular POSB a/c exceed prescribed limit, to an extent of the interest of Rs. 3,500 in the case of an individual account and Rs. 7,000 in the case of joint account"

The amendment will be effective only from  PY 2012-13 relevant to the  assessment year 2013-14.

so, Interest upto R3,500 is exempt from tax under Section 10(15) of the IT Act. Further, a deduction of R10,000 is also available for the interest under Section 80TTA of the IT Act

Post office fixed deposits interest is taxable