Where should you invest for regular income and safe returns?
The Post Office Monthly Income Scheme (MIS) is a low-risk investment scheme offering steady income and, hence, is suited for conservative investors and senior citizens. It is one of the small savings investment schemes wherein you can start investing with a minimal amount of Rs 1000. This scheme is one of the popular investment options in India, as it is a government-backed scheme and the invested amount is protected by the government until maturity.
The MIS is a fixed income scheme and is a low-risk investment. The money deposited is not subject to market risks and stays safe. With MIS, investors earn guaranteed interest returns every month. The current interest rate offered by Post Office MIS is 6.6 per cent per annum.
Post Office Monthly Scheme Accounts can be opened by:
A single adult
Joint account (Maximum three adults)
Minor above 10 years of age in his name
A guardian on behalf of a minor/person of unsound mind
Only a resident Indian can open a POMIS account.
NRIs and HUFs cannot enjoy the benefits of this scheme.
From 01.04.2020, the interest rate is 6.6 per cent p.a. payable monthly. (meaning compounded annually but paid monthly). For instance, if you invest 1,00,000 in MIS then you will get 550 p.m. as interest i.e.6600 p.a.(550*12) or (100000*6.6%). Now bonus is not payable on maturity (earlier it was 10 per cent, later discontinued and then it was 5 per cent till December 1, 2011).
Minimum amount for opening of account should be in multiples of Rs 1000. You can make a maximum investment of Rs 4.5 lakh in the scheme. Even if you hold the scheme in multiple post offices, the aggregate of all your deposit cannot exceed Rs 4.5 lakh. The maximum limit in the case of joint accounts is Rs 9 lakh.
The lock-in period for Post Office MIS is five years. You can withdraw the invested amount when the scheme matures or reinvest it. Premature withdrawals are allowed after the expiry of one year. The rate of penalty for premature withdrawals is two per cent of the deposit amount if withdrawals are effected on or before the expiry of three years and one per cent thereafter.
Tax-efficiency: Though your post office investment doesn’t fall under Section 80C and the income is subject to taxation. On the other hand, it has no TDS either.
Multiple account ownership: You can open more than one account in your name. But the total deposit amount cannot exceed Rs. 4.5 lakhs in all of them together.
Nominee: The investor can nominate a beneficiary (a family member) so that they can claim the benefits and corpus if the investor passes away.
Transfer: In the event of shifting from one city to another, you can easily transfer your investment to your post office in the current city at no extra cost.
Reinvestment: You may reinvest the corpus post maturity in the same scheme for another 5 years to get double benefits.