What is Post Office Monthly Income Scheme?
Post Office Monthly Income Scheme is supported by the Indian government, and it is a service provided by the Indian post office. It is widely regarded as one of the safest ways to save money and earn interest in India. Monthly Income Scheme (MIS) pays interest each month to the account holder.
If you desire a consistent return on your investment, this is one of the most reliable plans for you. You can take advantage of post office MIS through any nearby post office.
You have other options as well. There is a long list of the best savings scheme in India that you can go through for saving and investing through safe and profitable strategies.
In this post, you will learn crucial information about the Post Office Monthly Income Scheme (POMIS), such as the eligibility criteria, the process of opening an account, interest rate, key features, and more. So let’s begin!
What are the Eligibility Criteria for Post Office MIS?
The PMOIS is open to youngsters above 10 years of age and Indian citizens. Also, you can readily transfer your MIS account from one post office to another without incurring any additional fees.
How Can You Open a PMOIS Account?
Opening a POMIS account is an easy and hassle-free process. If you don’t already have one, you should first apply for a savings account and take the following actions:
- Obtain a POMIS form at the neighbourhood post office.
- Send the form and the required documentation (generally a Photocopy of ID Proof, address proof, and 2 Passport-sized photographs)
- Get the original documents verified.
- Obtain the witnesses’ or beneficiaries’ signatures.
- Deposit the initial sum using a check or another form of payment.
It is notable that when writing a check, the date written there is taken into consideration as the account opening date. Interest is paid on the principal starting the following month.
What is the Post Office MIS Interest Rate?
The POMIS offers a 5-year term with an annual interest rate of 7.10%. The interest rate is reviewed by the government each quarter. Post Office Monthly Income Scheme does not provide a special interest rate for senior citizens.
So if you are a senior citizen, the Senior Citizen Savings Scheme (SCSS), which gives an interest rate of 7.4%, is more beneficial for you.
What are the Main Characteristics of POMIS?
You must be aware of the following key features of the post office monthly saving scheme before investing in it:-
Low-risk Investment Option
The first thing that comes to mind while investing is risk. So the good news is that POMIS is the safest investment option because it carries little to no risk. The account holder regularly receives monthly distributions as returns.
Convenient Lock-in Term
There is a 5-year lock-in term for the POMIS, but you can reinvest in the programme after this lock-in time if you so desire.
Joint and Sole Accounts Facility
A solo or joint account may be held under post office MIS. Three adults at most may open a joint account; each will receive an equal part of the funds.
The Smallest and the Largest Investments are Possible
To register a POMIS account, you must invest ₹1500 at the very least and ₹4.5 Lakhs at the most.
Minor Can Open Their Account
Even a minor can own a Post Office Monthly Income Scheme account, but the minimum age requirement is 10 years old. A minor is only permitted to invest up to ₹3 lakhs. The account can be converted into an adult account after the kid turns 18.
Premature Departure is Permitted With a Small Penalty
You are eligible for an early withdrawal if your account is older than a year. However, there is a minor 1% penalty for early withdrawals made after 3 years. And a 2% penalty is for early withdrawals between 1 and 3 years.
Not Eligible for Tax Deductions
The investment in the monthly income scheme is not exempt from taxation under Section 80C of the Income Tax Act. Although the TDS is not subtracted from the POMIS interest amount, the interest you get under this scheme is unquestionably taxable.
What are the Key Benefits of the Post Office Monthly Income Scheme?
Post Office Monthly Income Scheme offers investors two significant benefits in addition to its core characteristics. They include:
Your investment portfolio generates a consistent monthly income regardless of market changes. The post office has set a fixed interest rate of 6.70% per annum.
Opportunity to Diversify Investment Portfolio
You can invest the interest you earn through a post office monthly saving scheme in more profitable instruments like stock, shares, or equity funds. As a result, you can build a varied investment portfolio and earn somewhat greater returns. One thing to remember is that doing so also entails substantial risk.
Are There Any Alternatives to POMIS?
Some alternatives to Post Office Monthly Income Scheme include a fixed deposit with a bank, Freo Save – a digital savings account, and National Savings Certificate. The lock-in term and maturity time vary for each option. And each of these alternatives offers attractive interest rates, and they have their own advantages.
Let’s understand better through a table.
|Post Office MIS||Bank Fixed Deposit||Freo Save Digital Savings Account||National Savings Certificate|
|Investment is limited||Investment is not limited||Investment is not limited||Investment is not limited|
|Premature withdrawals are permitted after a year of investment but with a penalty||Premature withdrawals with a penalty are permitted||No penalty for withdrawal. It can be done anytime||Premature withdrawal is allowed in exceptional cases only|
|TDS is not applicable||TDS is applicable||TDS is not applicable||TDS is not applicable|
|None to low risk||No risk||No risk||Low risk|
|Returns are guaranteed||Returns are guaranteed||Returns are guaranteed||Returns are guaranteed|
|Fixed-rate of interest at 7.10%||Fixed-rate of interest at 5.1% to 7.25%||Rate of interest up to 7%||Fixed-rate of interest at 7.0%|
|Absence of tax rebate||Eligible for tax exemption under Section 80C||Deduction of up to ₹10,000 on the total savings account interest income under Section 80TTA||Eligible for tax exemption under Section 80C|
As you can see, Freo Save can be the best choice for investment if you don’t want to give up liquidity because it’s a digital savings account with no maturity period. Additionally, you are not restricted in any way regarding the amount you can invest or the number of times you can withdraw money.
Moreover, since it provides a zero balance facility, you don’t have to worry about maintaining a certain minimum balance in your bank account to keep it open.
Click here to open a Freo Savings account and enjoy up to 7% interest on your savings.