Couple of weeks ago, I wrote about Monthly Income Plans or MIPs, and this week I’m going to write about a similar monthly income scheme from the Indian post office called the Post Office Monthly Income scheme.
This is a fixed income scheme which provides you a guaranteed return on your investment, and is meant for people who are looking for a monthly source of income without taking any risk at all.
Where the mutual fund MIP invests a part of its assets in equity, and even gold in some cases – and may sometimes even get you a higher than 10% return (with commensurate risk of course) this scheme has a fixed rate of return and is meant for people looking for an ultra safe investment.
Here are some features of this scheme.
Post Office MIS Interest Rate
This is a scheme from the Indian postal service that earns you an interest of 8% per annum, and generates a monthly income for you.
So if you invest Rs. 100,000 in it – your annual interest at 8% will be Rs. 8,000, and you will get Rs. 666.67 monthly.
Post Office MIS Tenure
The maturity period of the scheme is 6 years, at the end of which you will get your money back. You cannot redeem your money within a year, but you can redeem it after that upon paying a penalty.
Here is how that works.
Less than 1 year: MIS can’t be encashed.
1 – 3 years: You are penalized 2% of deposit.
After 3 years: You are penalized 1% of your deposit.
5% Bonus
If you retain your Post Office MIS till maturity (6 years) – at the end of the time period you will be given a 5% bonus on your deposit.
Minimum and Maximum Investment
The minimum sum you can invest is Rs. 1,500, and you can go up to Rs. 450,000 in case of a single account, and Rs. 900,000 in case of a joint account.
Tax on Post Office MIS
There is no TDS on the Post Office MIS, but the interest income is taxable in your hands. The interest income from post office MIS used to be tax free under section 80L, but that section has been withdrawn from April 1 2005.
Interest can be automatically credited to your bank
At the time of opening the scheme you can give in your bank account details, and interest will be automatically credited to your bank every month.
Transfer from one post office to another
There is a provision that allows you to transfer your money from one post office to another. So, if you opened your account in one post office, and moved to another place you can fill up a transfer form with them, and move your scheme to another post office.
Conclusion
This scheme is meant for people who are looking for an ultra safe investment and a regular source of monthly income on top of it. A lot of retired people will fall under this category, and if you fall under that category then you need to evaluate other options like the Senior Citizens Savings Scheme before you invest in this scheme. I”ll cover that scheme in the days to come, and if you have any questions about this particular scheme or any other observations please leave a comment.
{ 28 comments… read them below or add one }
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can we take 80c deduction in mis scheme and koun2 iska benefit le skte hai
can we take 80c deduction in mis scheme deposit
Regret to inform but you cannot claim deduction under section 80C for PO MIS. Instead you are liable to pay taxes for the Interest earned for the particular financial year.
I want to take Small Saving Agency in karnataka., what is the procedure. kindly send me mail please.
Hi Srithar… You need to contact the Post Office for the exact procedure.
i want invest 3-4 lakh in safe jone investment like MIS inpost office,kindly guide me by mail whre is invest.
thankyou ….. great help
jus a little confusion ..
“Tax on Post Office MIS
There is no TDS on the Post Office MIS, but the interest income is taxable in your hands. The interest income from post office MIS used to be tax free under section 80L, but that section has been withdrawn from April 1 2005.”
so this means there is no further tax reduction on 666 pm since 2005 ??
Hi Rahul… It is an old article. The current interest rate on POMIS is 8.5% per annum payable monthly, there is no TDS but it is fully taxable i.e. you will have to add the interest earned in your taxabale income.
thanks
If I want to invest (4.5L) in the name of a minor (3 years), is this a better option and what is the tax implication as I;m a housewife and received this money from sale of an ancestor property?
What if one of joint account holders of MIS dies?Should joint account still be continued?
Please transfer the account in your name in such a case.
Thanks Manshu,but considering limit of 4.5 lacs for each sharer,Are u sure it’s possible to get full control of 9.0 lacs in Mis joint acct of 2 people?Any references would be highly appreciated.
Sourabh – I’m sorry I didn’t realize you were also referring to the 9 lakh limit. That is a good point and I guess why else would you be interested in the question if you weren’t near the limit.
You shouldn’t get control of the full 9 lakhs and you will have to give them a death certificate immediately so they can tell you how to proceed. I’m sorry about my earlier comment. I made a mistake in fully understanding your question.
Hi Sourabh and Hi Manshu… I want to add this info here – “If one of the depositors/joint holders of a Post Office MIS account dies, the account will have to be converted into a single account in the name of the surviving depositor from the date of death of the said depositor when a report to this effect is received in the post office. The Post Master/Senior Post Master will ask the surviving depositor to withdraw the excess amount, in excess of the limit prescribed for single depositor (Rs. 4.5 lakhs at present), as this amount will not carry interest from the date of death of the joint depositor. The interest already paid on this excess amount will be recovered or adjusted.”
Dear Shiv,
In this case, if the penalty (1% or 2 % depending on the time period) will be applicable while withdrawing the excess amount. Also what will happen to the 5% bonus.
Regards,
Dear Himanshu,
No penalty is applicable in case of death of the depositor/joint holder in Post Office Monthly Income Scheme (POMIS). Also, as per the Manual of Post Office, “The MIS Rules clearly provide for payment of bonus where admissible on completion of maturity period of the account irrespective of the fact as to whether the account holder is/was alive or not on the date of maturity”. So, it looks to me that the bonus of 5% will be paid in full on the original deposit of Rs. 9 lakhs on maturity i.e. Rs. 45,000 (5% of Rs. 9,00,000).
Dear Shiv,
Thanks for the reply. Still confused regarding the bonus. Why the Post office will pay bonus for full Rs 9 lakhs while Rs 4.5 lakhs are already withdrawn before maturity as a excess deposit money after the death of joint holder.
If there is any issue in keeping the deposit as it is and no excess deposit is withdrawn. After maturity the deposit amount can be taken on the name of the surviving depositor.
Regards,
Dear Himanshu,
I dont know the precise logic behing them paying 5% bonus even after the withdrawal of the excess amount but the language of the Post Office Manual is there for everybody to refer. As per the Manual, the bonus is payable on maturity even if the account holder is not alive.
I have not faced any such case with any of my clients, but I think one can confirm it with the Post Master/Senior Post Master, if required. This is probably some kind of “Bullet Payment” provision which is there with the PO MIS.
Thanks Shiv,
Please suggest –
If there is any issue in keeping the deposit as it is and no excess deposit is withdrawn. After maturity the deposit amount can be taken on the name of the surviving depositor.
Regards,
No interest will be paid on the excess amount from the date of death of the joint depositor. The interest already paid on this excess amount will also be recovered or adjusted.
what should be the minimum age of a person for investing amount in post office MIS.
Ten Years; a minor of 10 years and above age can open a Post Office MIS account.
What is the process of transfer of a joint account ?
I have an account with my father but now we are both moving to different cities.. can I get this account transferred to my city without requiring his presence. ??
who is doing this trading i want to talk to dat guy
I have invested Rs. 6000/- in MIS last month and have received Rs. 42/- as interest and got the interest amount auto-credited to my Savings Account. Thanks for the provision of auto-credit, it’s a great help. In case I want to invest more amount in MIS as and when any amount is availble with me in future, it seems I have to open a separate Account instead of adding the new amount to my alrwady existing MIS Accounts. It is very uncomfortable as the accounts are going to be splitted up and I will have to maintain a number of Accounts till I complete the amount of 4.5 lakhs. Instead of having No. of Accounts, the MIS Account for one single person should be only one, whenever any person is investing in this Scheme at different times the short amounts should be added to the original MIS Account and interest calculated accordingly. This will help the customer in maintaining only one Single Account than a number of Accounts. – Suggestion Please.
To the best of my knowledge, this is the situation as it stands today, and there’s nothing that can be done about it right now.
Hi Sujatha… One suggestion would be to open a Post Office Recurring Deposit account in which rate of interest is similar at 8.30% p.a., but the only thing is it does not pay interest on a monthly basis.