Post Office Monthly Income Scheme

by Manshu on December 13, 2010

in Investments

Post Office Letter Boxes, EC1A 1AA .London Chief Office 1994photo © 2008 Felix O | more info (via: Wylio)

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 The interest income from post office MIS used to be tax free under section 80L, but that section has been withdrawn from April 1 2005.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.

{ 100 comments… read them below or add one }

Indian Thoughts December 13, 2010 at 2:10 am

Generally retired people make use of it.. atleast everyone retired from govt job in my family does use it.

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Manshu December 13, 2010 at 7:33 am

Don’t they have the option of investing in this Senior Citizen’s Savings Scheme which has a higher rate? I read about it somewhere but can’t recall on the top of my head if that gives out a higher rate and by how much.

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Indian Thoughts December 13, 2010 at 10:19 am

i think they have senior citizen savings scheme + MIP

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chocolate December 13, 2010 at 3:11 am

Hi Friend,
This scheme is very useful for those who have money to invest and they want to play a safe game, POMIS will give regular return on regular intervals and we can get the money back after the decide period.

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Nataraj December 13, 2010 at 4:18 am

I would like you to comment on Postal MIS with interest going to monthly Postal Recurring Deposit scheme…instead of cumulative FD in a bank…..

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Manshu December 13, 2010 at 7:32 am

Let me try my hands on that, but I am off for vacation for most of the remaining month, so it will take a long time.

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Nataraj December 15, 2010 at 2:19 am

I now realise that Interest from MIS, when goes to Postal RD, the yield for 5 year term is 10.95%…best in class….
http://www.indiapost.gov.in/netscape/6yearsMIS.html

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Manshu December 17, 2010 at 10:56 pm

Great – glad you found that link, which even Dhruva shared. Thanks for sharing.

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Dhruva December 13, 2010 at 11:07 am

I research a lot on this long back. Take a look at this link on their official website-
http://www.indiapost.gov.in/netscape/6yearsMIS.html

The thing that turned me on was the option to reinvest the monthly interest as a recurring deposit – which will make it 10.5% assured interest. (which was kind of highest assured interest I could find across board).

But then the thing that turned me off was – no computerization/online modes etc – so we need to goto post office to setup and check. (harder for me as I am sitting in USA) – still it is one of the options I am exploring to do when I return to India.


Below excerpts is taken from their website-

Deposit in Monthly Income Scheme and invest interest in Recurring Deposit to get 10.5% (approx) interest.

Above scheme operates automatically, if you open a saving bank account and give a request for automatic transfer of Monthly Income Scheme interest to Recurring Deposit through Saving Bank account.

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Venkat Sundaram December 14, 2010 at 1:57 am

Sure, This is very safe & high return (as of now) investment. This scheme can work together with MIS+ interest going directly into RD (RD is for 5 yrs only) incase monthly income is not necessary. For ease of monthly interst calculations investments in mulltiples of Rs. 1,500 is idle. as Rs. 1,500/- earns interest of Rs. 10 a month.

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Atul December 14, 2010 at 10:02 pm

DOn’t u think investment in NSC gives the same return + we don’t have to depend on the agent(with the number of frauds happening these days). How can we ensure that the money received as monthly interest is depostited in the RD account every month by the agent.

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Manshu December 17, 2010 at 10:58 pm

NSC doesn’t have a monthly return option so that makes a difference for people specifically interested in the monthly income. I don’t think they yield ~10% do they? I remember it being in the 8% range.

Plus I’d do this myself if I had to get into this, it’s not necessary to go through an agent, and you can always monitor the account to see nothing is amiss.

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T K Vani December 20, 2010 at 3:00 am

Hi,
Just to add, Now you have the option of extending the postal RD upto a period of 10 years
The six Year maturity value (to Correspond with the MIS maturity date ) for RS10 RD is 910.08.

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Manshu December 20, 2010 at 11:45 pm

I’m not quite sure I understood what this means. The RD will last for 10 years, or the MIS can be extended for another 6 years, could you please elaborate?

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Kunal January 10, 2011 at 4:45 am

Hi,

Firstly, my applauds for such a useful site…
I would also like to get some clarity on the how the RD works. It would be great if explained by an example.

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Manshu January 10, 2011 at 5:10 am

Thanks Kunal – Recurring Deposits involves depositing a sum monthly, and then having it compound, and grow for a fixed period. You can open a RD with a bank or a post office. I’ll see if I can do a post on this topic.

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prakash sharma December 26, 2010 at 9:58 am

as per rbi site some specific branchesh of nationalize banks are entitled for mis scheme like uco bank branch office ghumarwin
do u knaow about other branches and what is procedure?
as bank employees themselves don,t know about that

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Manshu December 28, 2010 at 8:27 am

Sorry – but I’m not aware of any specific bank MIS schemes either.

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Rahul January 14, 2011 at 3:50 am

Hello EveryBody! Really a good place for some nice basic knowledge & advanced too.

Regarding MIS + RD together:

As per the link provided by Dear Nataraj, if we invest say Rs. 15,000 in MIS & deposit the monthly interest (Rs. 100) in RD A/c, the proceed we receive after 6 years is –

From RD Maturity – Rs. 9101/-
From MIS Principal – Rs. 15000/-
From 5% MIS Bonus – Rs. 750/-
TOTAL – Rs. 24851/-

If we open NSC A/c with the same amount i.e. Rs. 15000/- as Principal, we get Rs. 24015/- as maturity value at the end of 6 year.

So Net Gain in 6 Years is Rs. 836/- [for an initial investment of Rs. 15000/-]

Plus of MIS + RD : Extra Interest of Rs. 836/-

Minus of MIS + RD : No tax benefit u/s 80C + No treatment of accrued interest in the subsequent years for the purposes of 80C benefit.

Thanks.

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Manshu January 14, 2011 at 8:59 am

Hi Rahul – thanks for the excellent comparison you have done!

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Shankar Narayanan January 26, 2011 at 12:53 am

Many Thanks to the writer and the followers for sharing very vital information about MIS.

The question I have is, for 1500 Rs. investment, 8% of interest gives 120 per year. So, monthly 10 Rs.

But, in a website, it has been mentioned 8% interest and income for 1500 Rs. is 7 Rs per month. Can somebody add more light?

This is the URL:
http://www.tamilnadupost.nic.in/fsvc/banking_mis.htm

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Aravinda K V February 17, 2011 at 8:59 pm

Can I add top-up to my existing MIS Scheme.
Please give the procedure for it. Can I do it online?

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Manshu February 18, 2011 at 9:30 am

Online for the post office? Our post office is not that high tech yet 🙂

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mini punjrath February 26, 2011 at 12:11 am

i want to know if the form for transfer of POST OFFICE MIS can be downloaded from internet, as i am out of town and not able to get this form
thnx
minipunjrath

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Manshu February 26, 2011 at 2:32 pm

Mini – I’m not aware of any way of downloading the form from their website, or submit it remotely.

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BUY eGOLD & eSILVER February 27, 2011 at 8:50 am

As far I am aware, you can have deposit of Rs: 4.5 Lakhs in Single name and 9 Lakhs in joint names.

The rate of interest is 8% with 5% bonus on Maturity.

You have the option of DIRECT CREDIT to your ANY SAVING account with any bank.

Interest is exempted u/s 80C under the overall limit.

It is a good and Safe investments and highly recommend everyone for utilising this investment limit to the fullest, if you are not requiring the fun in the near future.

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Vilas Vasant Patki March 9, 2011 at 4:20 am

I want to know whether the maturity amount (Principal Amount +Bonus) of Post Office MIS is liable for Taxation at the time of maturity.Secondly,whether the monthly interest earned on the Deposits in MIS are fully taxable or is there any rebate/concession available under any section of Income Tax Rules
Vilas Vasant Patki

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Manshu March 10, 2011 at 5:38 pm

The interest earned is taxable, and to the best of my knowledge there is no way to avoid that. I’m however not 100% if there is absolutely no way to avoid that because there might be a way to invest it somewhere that I’m not aware of. Ordinarily it is taxable though.

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Rupesh S Mahadik April 23, 2012 at 9:02 am

There will be no tax on the principal amount invested, but you will have to pay tax on the bonus amount receivable on maturity, talking about the Monthly interest earned on the MIS it is fully taxable and advisable to show this amount while you file your yearly IT returns.

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Debanjan Mukherjee May 29, 2011 at 1:38 pm

Hi Chaps,

Thanks for the posts. However, I discovered some problems with the values shown by the calculators on the PO website which I am explaining below.
For Rs. 60,000 in MIS the calculator displays the following values –
Monthly Interest = 400
If Monthly Interest is deposited in RD account –
Maturity Value = 36403
5% bonus of MIS = 3000
Total gain = 39403
Per year = 6567
Percentage interest = 10.945

The maturity value for the RD assumes that the RD runs for 6 years whereas in reality it only runs for 5 years, in which case the interest is Rs. 29156. The RD effectively matures an year earlier than the MIS. So I am not sure the percenatge interest being shown actually is accurate.

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T K VANI May 31, 2011 at 1:34 am

Hi,
Now you have the option of extending the RD up to 10 years though your MIS account will not earn interest if it stays beyond the stipulated 6 years.
however with the RD you have the option of continuing with Deposit, or without Deposit, upto a period of 10 years. Now the post office allows auto debit from MIS account to RD.you also have the option of paying for the RD by annual mode incase you do not want to go to the post office everymonth.You can give automatic credit to your SB and draw and pay everyyear annually for which you will get a reabate of 400 rupees for every thousand for annual payment.

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Manshu June 6, 2011 at 4:05 pm

Thanks a lot for answering that!

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Debanjan June 7, 2011 at 5:34 am

Does the PO provide a accrued interest certificate for filling IT Returns on RDs?

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CHIRAG July 7, 2011 at 8:55 pm

i had invest rs. 600000=00 in mis (post office scheme) date -26-4-2006. i have entitiled for bonus. if yes how much .

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Manshu July 9, 2011 at 11:27 pm

At the redemption, everyone gets the bonus, so yes, you will get a 5% bonus when it’s redeemed next year.

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Ankit July 29, 2011 at 10:36 am

Hi

My quesion is to you, on redemption of Post office MIS scheme How I treat the bonus part on redemption should I treat long term capital gain and take the benefit of indexation. Please advice on this issue.

Regards
Ankit

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Manshu July 29, 2011 at 7:47 pm

Sounds like this is capital gains Ankit, but I’m not sure, best to check with CA.

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Ankit July 29, 2011 at 10:48 am

Tax Treatment for Bonus under Post Office Monthly Income Scheme

Under above scheme, bonus equal to 10% of the Principal amount of
deposit is made by post office in case withdrawl of deposit is made
after expiry of the prescribed period of deposit i.e. 6 years. What
tax treatment is to be made for above receipt?
(1) Whether the same is to be treated as receipt of interest and
is to be offered for tax
(2) Whether the same is to considered as capital gain in spite
of the fact that the amount invested is an investment and not
capital assets.
(3) Not liable to tax at all.

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sanjiv arora August 23, 2011 at 8:15 pm

we have mis scheme in post office for rs450000/-in two names,either or survivor,ist person is expired&survivor wnats to withdraw itbefre maturity ie after 9 months. idon!t want to be penalized. kindly suggest .thanks

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Manshu August 24, 2011 at 5:12 am

I’m sorry for your loss – unfortunately, I don’t know enough to give you a definite answer, and will advise you to go to the post office and find that out.

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I.N.Mukherjee August 29, 2011 at 12:26 am

Pl. intimate whether the bonus received after maturity from Post Office MIS is taxable?

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Manshu August 29, 2011 at 5:09 am

Yes, to the best of my knowledge it is taxable.

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I.N.Mukherjee August 30, 2011 at 12:24 am

Dear Mr.Manshu,
Many thanks.One more query.If father has invested the principal amount in the PO MIS A/C & it is held jointly with his son ,whether son has to pay gift tax on the principal amount also after its maturity in case his father expires before the maturity?

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Manshu August 30, 2011 at 4:46 am

I’m not as up to date with tax info as I’d like to be and I’m not quite sure what will happen in this case.

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T K VANI September 1, 2011 at 9:01 pm

well there will be no gift tax in this case as father’s money passing on to son will be considered as gift received from a relative which is exempt (any amount)(father son any lineal ascendant or desendant)

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Jyostnarani Behera September 22, 2011 at 12:31 pm

if i invest 1lac in POMIS then after maturity how much extra amount i will get.for example every month i will take the monthly interest .excluding that amount how much i will get after 6 years.

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Rupesh S Mahadik April 22, 2012 at 9:49 pm

Excluding the Interest amount you received every month, you will be receiving your principal invested amount back but with addition of a 5% Bonus i.e total 105000/- in your case.

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Shiv Kukreja April 23, 2012 at 12:52 am

Hi Rupesh… Govt. has stopped paying any Bonus on Post Office MIS since December 1st, 2011.

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Rupesh S Mahadik April 23, 2012 at 8:04 am

Even I have heard of the same but what about the MIS accounts opened prior to 1 DEC 2011, I don’t think this new rule is applicable for old MIS, are they going to pay us the interest as per new interest rates, there are such things still to confirm, I searched & am searching for such information even PO agents are still in a confusion, even though once again I will be asking my PO agent about this & forward the related info as soon as the same reaches me, till then it would be really fine if you or anyone on this forum could confirm the same if possible.

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Rupesh S Mahadik April 28, 2012 at 2:29 pm

Once again I reconfirmed with my PO Agent and she also confirmed that the discontinuation of Bonus will not affect old PO MIS i.e the bonus of 5% will be applicable on maturity only PO MIS opened post DEC 2012 will not get bonus.

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Manshu April 28, 2012 at 6:15 pm

Still not certain that’s true because there were news reports in Dec 2011 about the bonus being scrapped. Here is a link for reference. http://www.thehindu.com/news/national/article2618995.ece

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Rupesh S Mahadik April 29, 2012 at 8:58 am

Thanks Manshu for your Reply & the Link for reference. I went thru the same & found a comment of Shri. S.KRISHNAN even he had raised his concern over the scrapping of bonus but in an immediate reply to his post itself he had cleared that the Bonus on Maturity remains unaltered for PO MIS opened prior to Dec 2011. Find below the excerpts from his post for reference.

[ “Further to my post on 29.11.11 i wish to clarify that our fear was unfounded and based on misleading reports in newspaper. As per Notification i have read to day no.113 dt 24.11.11 the maturity bonus is not applicable ONLY ON new MIS accounts opened on or after 1.12.11.Therefore the interest of existing ongoing account holders stands unaltered. One may visit post office web site and see the notitification No.113 which is very clear.

from: S.KRISHNAN
Posted on: Nov 30, 2011 at 13:22 IST “]

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Shiv Kukreja April 28, 2012 at 9:31 pm

Not “post DEC 2012” it should be “Post December 2011”.

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Rupesh S Mahadik April 29, 2012 at 9:01 am

Thanks for pointing out the mistake.

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Mujeeb.T.A September 23, 2011 at 3:22 pm

DO any body knows this?
After maturing RD or MIS account do post office return back the money through the agent if we have given signed documents or is it compulsory the person should present for withdrawel?

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Mujeeb.T.A September 23, 2011 at 8:30 pm

hhh

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BIDYUT November 23, 2011 at 2:13 pm

l lik everyday information

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parmod kashyap November 27, 2011 at 9:30 pm

I have suficiant amount iin co operative bank and i want my money deposit in post office as mis . Tell me the proceedure.

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Manshu November 27, 2011 at 9:40 pm

You will have to go to a post office and figure it out – they will explain it to you.

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Jit November 29, 2011 at 11:11 am

Govt increases the interest rate from 8% to 8.2% but scraps the 5% bonus on maturity. Also it states that rate notification will be from Dec-1 and the MIS of old schemes maturing after Dec-1 won’t get the 5% or 10% maturity bonus? Is this true? If yes then we should take forward it; how can govt not increasing the interest rate of our savings from the date of invested even not giving a single penny of increased interest rate rather they are snatching the maturity bonus (5% or 10% of old schemes) from us if the maturity date falls after 1-Dec.

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aparna December 2, 2011 at 5:36 pm

i want to know what can be the maximum amount in Monthly Income of post office to avoide Income tax by senoir citizen of 70 year.

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Manshu December 3, 2011 at 1:50 am

That question doesn’t make any sense to me. What are you trying to do? Reduce taxable income? You can invest up to Rs. 1 lakh in some investments fixed deposits and then another 20K in some more bonds. That’s the way to reduce taxable income.

You can’t just avoid paying tax by investing in a post office scheme.

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sanjay wali December 21, 2011 at 4:57 pm

in case of MIS if the account holders are both dead the monthly installment of MIS will change or
remain same , in case of nomination.

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Manshu December 21, 2011 at 8:52 pm

Don’t know about that Sanjay – better check with the post office directly.

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durga prasad March 6, 2012 at 6:03 pm

dear sir,

can i open one or two efferent mis account in post
al india

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Saikat Sarkar March 16, 2012 at 3:13 pm

in a mis of either or survivor account who is the owner of that mis….example,,

(1) mrs, x
(2)mr. y
(3)mrs. z

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Manshu March 19, 2012 at 4:17 am

What do you mean by owner? What exactly are you trying to find out here?

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bhandary April 7, 2012 at 10:30 am

Dear Sir

had visited post office today to update my POMIS passbook, there i heard the officer telling another investor that Bonus has been withdrawn wef 13 Feb 2006, can you please clarify regarding Bonus on POMIS Scheme.

regards
bhandary

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Manshu April 9, 2012 at 3:39 am

Yes, they don’t give the 5% bonus any longer.

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Rupesh S Mahadik April 23, 2012 at 8:50 am

As per my information prior to FEB 2006 the bonus was 10% & in FEB 2006 the same was discontinued but w.e.f. December 8, 2007 the government has reintroduced the bonus option on maturity in the scheme but a lower rate of 5% but as per the recent information w.e.f 01 DEC 2011 bonus has been discontinued, but I hope it should be applicable to MIS opened post DEC 2011 but I am still unclear of what will happen to the bonus on MIS opened prior to DEC 2011, I am searching for this information, if someone have any confirm source pls reply.

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pankaj April 8, 2012 at 1:29 pm

kya mis 4000000 tak invement kiya ja sakta hai aur us me in cometax bhi dena parega kya ? plz sir guide kare hindi me

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Manshu April 8, 2012 at 8:21 pm

4.5 lakh ki upper limit hai to aap 40 lakh nahi invest kar sakte. Aur income tax to dena hi padega chahe jitna bhi investment ho.

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pankaj April 9, 2012 at 12:57 pm

sir
joint account pe 9 lack mis invest to kiya ja sakta hai agar family member ke naam se 4 join account agar khola jaye to aur sir isme jo monthly retyrn milta hai usme to tds & tax included hota hai

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Ashwin April 13, 2012 at 8:41 pm

Hi Manshu,
First of all i would like to Thank you for taking time to answer all of our questions, i really appreciate it !.
Like others i too have a question, My Father opened a MIS account on my name 3 years ago, now it is time to encash the MIS principal and the interest that was going into the linked SB account.
the problem is i do not have a Bank account in india, i do not want to open a bank account either just to encash the MIS. would they just pay me by cash or other means if i am willing to show up in person at the post office.

With Best Regards
Ashwin

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Manshu April 14, 2012 at 7:03 am

Thanks for your kind words Ashwin – as far as I know post offices don’t hand out cash like that for the MIS scheme but my knowledge about this is limited so I can’t say with 100% confidence whether you’ll be able to get cash or not.

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ram prasad guiya May 8, 2012 at 4:53 pm

I invested 500,000 in mis and renewal was jan2012,by mistake cannot do it on time but do it on the month of may 2012 now I want know can I get monthly income from jan to april,kindly clear me

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Manshu May 8, 2012 at 6:16 pm

Please check with the post office – they will let you know how to handle the situation a lot better than anyone on this forum.

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Rupesh S Mahadik May 8, 2012 at 8:37 pm

I hope you will not get the MIS interest amount for the period of JAN to APR, but you will recieve the interest amount applicable to Post office Saving Account i.e 4% P.A. For more information you can check out the clause 9A in the below link.

http://www.indiapost.gov.in/POSBActs/POMISRules1987.pdf

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Aman Wadhwa June 21, 2012 at 1:31 am

My mother had opened MIS account in Post Office for Rs. 2 lacs on 31-05-2006. On maturity date 31-05-2012 , i.e. complete period of 6 years , she received only Rs. 2 lacs. Bonus amount has not been paid to her. Please clarify whether the bonus amount is admissible to her or not.

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Rupesh S Mahadik June 21, 2012 at 9:25 am

As per my information prior to FEB 2006 the bonus was 10% & in FEB 2006 the same was discontinued but w.e.f. December 8, 2007 the government reintroduced the bonus option on maturity in the scheme but with a lower rate i.e 5%. Your mother opened the MIS in MAY 2006 which is the period during which Bonus was discontinued hence bonus has not been paid. I hope this is the reason your mother was not entitled for a maturity bonus. At that time It was a wise decision & hence many individuals withdrew their MIS & opened new MIS with bonus on maturity.

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Chandramouli July 4, 2012 at 11:41 am

Sir,
I invested in 6 year MIS on 28.6.2010. Now upon maturity I am told by the post office that during that investments during that period (for few months) do not attract maturity bonus. Is it right?

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Chandramouli July 4, 2012 at 11:43 am

Dear Sir,

I invite your kind attn to my query posted just now. In it please read the date of investment as 28.6.2006 and not 28.6.2010 as mentioned in it. Sorry for the trouble.
Thank you.

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Rupesh S Mahadik July 4, 2012 at 8:08 pm

Your PO is right in your matter, Maturity Bonus is not applicable for your MIS. For more information you may please refer my reply to the query of Shri. Aman Wadhwa, it is in the same context.

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Chandramouli July 5, 2012 at 10:18 am

Thank you, Sir.

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Shiv Kukreja July 4, 2012 at 8:11 pm

Yes, that is right – you wont get any maturity bonus of 10%. The maturity bonus remained discontinued for the investments done on or between Febryary 13th, 2006 and December 7th, 2007.

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Chandramouli July 5, 2012 at 10:20 am

Thank you, Sir for your kind reply.

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KBR DHAWAN July 18, 2012 at 1:08 pm

Post office Monthly Income Scheme used to pay 10% / 5% Bonus on maturity after six years in earlier years. My querry relates to income tax.
I am given to understand that the INTEREST income from the said M. I. Scheme is taxable but it is not clear whether the amount of 10% / 5% BONUS received on Maturity is TAX FREE or TAXABLE in the hands of the Account holder. Please give me a confirmed information as someone has to file tax return.

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KBR DHAWAN July 18, 2012 at 1:51 pm

Please clarify whether the Maturity Bonus received under the Post Office Monthly Income Scheme is taxable or tax free.

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Shiv Kukreja July 19, 2012 at 9:29 am

It is taxable.

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SUNIL CHOPRA July 19, 2012 at 4:23 pm

Dear Shri Shiv Kukreja,
I refer your comments / reply given in respect of the query raised by Mr. KBR DHAWAN on 18.7.2012. You say that the Bonus amount is Taxable. May I know, under what authority you confirm your statement. Is there any Section confirming your reply? Please clarify.
– SUNIL CHOPRA

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Shiv Kukreja July 19, 2012 at 9:18 pm

Hi Mr. Sunil… It is as per DG Posts letter No. 97-7/89-SB dated November 20, 1990:

http://www.tribuneindia.com/2012/20120108/biz.htm

DG Posts letter No. 97-7/89-SB dt 20.11.1990 states that the CBDT have clarified that the bonus payable under POMIS shall be treated as interest and will be taxable. Therefore, the same cannot be treated as capital gains.

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kjsarma August 2, 2012 at 11:31 pm

i got pomis wef nov 2004 during which time bonus and monthly interest NOT TAXABLE. but govt of india has later said tha interest and bonus are taxable wef 1.4.2005 . It is unfortunae from the point of depositer bcause…any scheme once entered will not be changed till its maturity. govt may apply new conditions for the schemes enterd later to 1.4.2005.in this scheme amount locked for 6 yrs.ie not allowed depositer to with draw.but new condition of tax has been imposed.it is g.ross injustice. my contention is that tax should not be imposed till its maturity.pl CLARIFY

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Shiv Kukreja August 3, 2012 at 9:49 am

Hi kjsarma… As far as I know, POMIS interest and bonus was always taxable even before April 1, 2005.

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kjsarma August 3, 2012 at 1:35 pm

Thank you for your response. On the same web page the below content is displayed for your information, to state that tax was imposed only from 1.04.2005.

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.

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Shiv Kukreja August 3, 2012 at 2:30 pm

:-)… There is a big difference between being totally Tax-Free and getting an exemption u/s 80L to make your income from these investments tax-exempt. Prior to April 1, 2005, one used to get a tax deduction of Rs. 12000 u/s 80L from interest on bank deposits, tax saving bonds, NSCs, POMIS among others.

All the interest income used to first get added to determine your gross taxable income and then deduction u/s 80L was applied. That ways interest earned over and above Rs. 12000 from all these instruments was taxable. This is on similar lines as we get exemption u/s 80C or 80D these days.

The difference lies in the language used to tell people that upto Rs. 12000 POMIS interest income was tax deductible. Interest income has always been taxable and TDS is never applied on POMIS. So I think nobody stands a chance to appeal against this Govt. notification. Sorry…

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Karan August 14, 2012 at 8:01 pm

If a lady has invested Rs. 9,00,000/- in MIS and like wise getting Rs. 6,000/- interest every month. the a/c is opened jointly with her son.
so will Rs. 72,000/- shall be taxed in the hands of the lady or Rs. 36,000/- each shall be taxed in the hands of the lady as well as her son?

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Shiv Kukreja August 16, 2012 at 11:38 am

Hi Karan… As per notification no. G.S.R. 706 (E) dated 5.9.2000 related to Post Office (Monthly Income Account) – “the depositor’s share in the balance of a joint account shall be taken as ½ or 1/3rd of such balance held in a joint account opened by two adults or three adults respectively.”

But the taxability of the interest income from POMIS joint account depends on the source of capital invested. If the son is not minor and his income has also been used to make the investment, then the interest income should be taxable in the hands of both the applicants in the proportion of the capital invested. If the mother has contributed all of the capital then the interest income will be added to the mother’s income in full.

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Karan August 16, 2012 at 1:15 pm

thanx for your advice..it was really very helpful! 🙂

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Shiv Kukreja August 16, 2012 at 1:18 pm

You are most welcome Karan!

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sujit kumar mishra October 9, 2012 at 3:09 pm

plz send any penssion plan for me…my d.o.b. 1st oct 1979.

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