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Amidst the ups and downs of the stock market, risks of mutual funds and changing interest rates on fixed deposits of banks, even today a large section of the country prefers safe and fixed income investment options. Especially for senior citizens, retired employees, housewives and those who want to withdraw a certain amount of pocket money or household expenses every month from their lump sum fund, the ‘Monthly Income Scheme’ (Post Office MIS / POMIS) of the Indian Postal Department i.e. Post Office is an excellent and reliable means. Being equipped with the Sovereign Guarantee of the Government of India, every penny deposited in it remains completely safe and any market shock has no effect on it. If you are planning to deposit a lump sum of ₹5,00,000 (₹5 lakh) in Post Office MIS, it is very important to understand the complete financial analysis of how much amount will be credited to your bank account every month as per the current interest rates, how much total additional earnings will be generated in 5 years and what are its terms and conditions.
The biggest attraction of the Post Office Monthly Income Scheme is that your principal amount remains completely safe during the entire tenure of 5 years and the interest earned on it is automatically transferred to your savings account every month. The Finance Ministry of the Central Government reviews the interest rates of Small Savings Schemes every quarter. At present the government is working on this scheme 7.4 percent annual interest Which is calculated on an annual basis but is paid in 12 equal installments every month. This means that once you deposit a lump sum, you continue to get a fixed pension-like income every month for the next 60 months without any hassle.
If you invest a lump sum of ₹5 lakh in Post Office MIS, the financial calculation based on the current interest rate of 7.4% per annum looks like this:
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Total Deposit Amount: ₹5,00,000
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Applicable Interest Rate: 7.40% per annum
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Annual Total Interest: ₹37,000 (5,00,000 × 7.4 / 100)
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Monthly Payout: ₹3,083.33 (Approximately ₹3,083 per month)
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Total interest earned in 5 years (60 months): ₹1,85,000 (37,000 × 5)
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Principal refundable on maturity: ₹5,00,000
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Total amount received after 5 years: ₹6,85,000 (Principal + Total Interest)
Simply put, if you open an account of ₹5 lakh, you will get an income of ₹3,083 every month directly into your post office savings account for the next 5 years. You can use this amount to meet your electricity-water bills, medicine expenses, children’s tuition fees or any other monthly requirement. And the best thing is that on completion of 5 years maturity, you will get your entire ₹ 5 lakh back as is.
The investment limits in Post Office MIS are very clear and transparent. Earlier the investment limit in this scheme was very low, but the government has given big relief by amending the rules:
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Single Account: If you open an account in your own name, start with a minimum of ₹1,000 and go up to ₹9,00,000 (₹9 lakh) Can deposit up to. If a person deposits a maximum of ₹9 lakh, he will get approximately Rs. ₹5,550 Has a fixed income.
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Joint Account: If husband-wife or two to three adult family members open a joint account, the maximum investment limit will increase to Rs. ₹15,00,000 (₹15 lakh) It happens. Account holders on maximum investment of ₹15 lakh every month ₹9,250 Receives monthly income of Rs. In a joint account, the share of all account holders is considered equal.
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Account in the name of minor: An account can also be opened in the name of a child above 10 years of age under the supervision of a guardian, the limit of which is determined separately.
If you don’t immediately need the ₹3,083 you receive every month, you can make this money grow faster by adopting a smart financial strategy. For this, you can open a Recurring Deposit (RD) account in the post office itself. You can give an auto-debit instruction (Standing Instruction) to the post office that the monthly interest of ₹ 3,083 received from MIS is directly transferred to your 5 year RD account.
Currently 6.7% annual interest (compounded quarterly) is being given on Post Office RD. By doing this, your principal amount of ₹ 5 lakh will be safe, and compound interest will also be added on the monthly interest received on it. When both the schemes mature after 5 years, you will get a huge corpus of RD (approximately more than ₹2.25 lakh) in lump sum along with the principal amount of ₹5 lakh, which will significantly increase your overall savings.
Although the tenure of Post Office MIS is 5 years (60 months), but in case of any emergency, if you suddenly need money, then the government provides the facility of premature withdrawal of account, for which some conditions are prescribed:
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Before 1 year: You cannot withdraw money under any circumstances for the first one year after opening the account (No Withdrawal Allowed).
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Withdrawal within 1 to 3 years: If you close the account after completion of 1 year but before 3 years, out of your total deposited principal amount 2 percent cut (Penalty) will be charged and the remaining amount will be returned. For example, deducting ₹10,000 from ₹5 lakh will give you ₹4,90,000.
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Withdrawal within 3 to 5 years: If you close the account after completion of 3 years but before maturity of 5 years, only the principal amount 1 percent reduction (i.e. a penalty of ₹ 5,000 will be imposed on ₹ 5 lakh).
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On completion of 5 years: On maturity, the entire ₹5 lakh is returned without any deduction.
It is very important to understand the status of Post Office MIS from the tax point of view. The first thing is that there is no tax exemption on the amount deposited in this scheme under Section 80C of the Income Tax Act. That is, it is a pure savings and income scheme, not a tax-saving scheme.
The second important thing is that the post office does not deduct tax at source (No TDS) on your monthly interest. That means the entire amount of ₹3,083 is deposited in your account without any deduction. However, this interest is not completely tax-free. The total interest you receive at the end of the financial year (₹37,000 annually) will be added to your total personal income under ‘Income from Other Sources’, and you will have to pay tax due on it as per the income tax slab you fall in. If your total income is below the taxable limit, you will not have to pay any tax.
Any adult citizen of India can open this account by visiting any nearest post office. The documents required for this include passport size photo, identity card (Aadhar card or Voter ID), address certificate, and PAN card. Also, to receive the interest amount, the applicant must have an active savings account in the post office. From the post office, the account can be easily transferred from one city to any post office in another city. Overall, Post Office MIS remains one of the most reliable options for investors looking for regular, safe and respectable returns on their deposits every month without any market risk.