The Post Office Monthly Income Scheme, more commonly known as MIS, is very popular among safety-seeking investors.
Here are all the details that you should know about PO MIS.
What is Post Office Monthly Income Scheme (PO MIS)?
This is a scheme offered by the post offices in India. You deposit a lump sum amount with the post office, and earn interest on it. The interest is paid out every month.
Since the scheme is offered by post offices, it is backed by the government. Thus, the PO MIS is one of the safest avenues of investment available.
As noted in “Retirement money: How to invest, where to invest”, the PO MIS scheme is a very good investment option for investing retirement funds.
The rate of interest offered on PO MIS is 8% per year. This interest is paid out every month. This interest can also be deposited directly in your savings account, so that you don’t have to go to the post office every month.
You get a 5% bonus on maturity. Thus, the effective yield works out to 8.9% per year.
Income Tax (IT) Benefits
There is no income tax benefit on investments in the scheme. The investment in PO MIS is not considered for deduction under section 80C.
(Please read “Saving Income Tax – Understanding Section 80C Deductions” to learn about the income tax benefits u/s 80C)
The interest earned is also fully taxable.
There is no tax deducted as source (TDS). The investment in PO MIS is also exempt from wealth tax.
The tenure of PO MIS is 6 years – your investment would remain locked for this duration.
Premature withdrawal / encashment / closure and Penalty
Premature withdrawal of the invested amount is allowed after 1 year of opening the account.
If the account is closed between 1 and 3 years of opening, 2% of the deposited amount is deducted as penalty. If it is closed after 3 years of opening, 1% of the deposited amount is charged as penalty.
The bonus amount is forfeited when you close the account early.
Who can invest?
Only individuals can invest in PO MIS – you can either open a single account or a joint account (2 / 3 names).
A Non Resident Indian (NRI) or Hindu Undivided Family (HUF) can not open a PO MIS account.
There is an upper limit on investment in PO MIS scheme: you can not invest more than Rs. 4.5 Lakhs in it in a single account. If you invest jointly (2 / 3 names), the limit is Rs. 9 Lakhs.
The minimum investment needed is Rs. 1,500.
The amount can be paid in cash, through a demand draft (DD) or locally payable cheque.
Number of Accounts
Any number of accounts can be opened, but the total investment can not exceed the upper limit across all the accounts.
Nomination facility is available – you can specify the nominee at the time of opening the account, or anytime later.
When can you invest?
The PO MIS account can be opened any time throughout the year.
On opening the Post Office Monthly Income Scheme (PO MIS) account, you would be issued a passbook. This passbook would be used to record all the interest payments.