The government has announced that some of the tax sops on Post Office schemes would be restored. A bonus of 5% would also be paid on the Monthly Income Scheme (MIS) / Monthly Income Account (MIA).
The government has announced that the benefit under Section 80C of the Income Tax Act (IT Act) would be extended to two Small Savings Schemes:
- 5 year post office time deposits (fixed deposits) – These have an interest rate of 7.5%
- Senior Citizen’s Savings Scheme – It has an interest rate of 9%
This benefit will be available on investments made on or after 1 April, 2007.
The government has also restored the bonus on Post Office Monthly Income Scheme (PO MIS) / Post Office Monthly Income Account (PO MIA). The bonus would be paid at the rate of 5%, upon maturity. This would be applicable for new accounts opened on or after Dec 8th, 2007.
(To know all about PO MIS, please read “Post Office Monthly Income Scheme (PO MIS)”)
The effective yield would jump to 8.9% (from the current 8.3%) due to this bonus.
It should be noted that there was a bonus of 10% on Post Office Monthly Income Scheme (PO MIS) / Post Office Monthly Income Account (PO MIA) earlier, but it was withdrawn by the government some time back. These steps have been taken as a measure to encourage and promote small savings.
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Dear Dr. Ramakrishnayya,
Although the bonus was stopped, and was later reinstated at a lower rate of 5%, MIS accounts opened before this change would continue to have this bonus at the bonus rate prevailing at the time of opening – 10%.
You must have opened your MIS account in 2002 – therefore, you would get a bonus of 10%.
since when Bonus was stopped for MIS in post office. My MIS in post office will be matured on 22-11-2008 after a period of 6 years. Am I entitled 10% bonus on my postal MIS.
Hello,
Since your section 80C limit has been reached, there would not be any difference in these from income tax point of view.
Investment in MIS are anyway not considered u/s 80C. A 5 year FD would give you tax breaks, but you have already reached the 80C investment limit.
Also, investing in your wife’s name would not give you any additional tax benefit as your 80C limit has been reached.
If we consider taxation of interest earned – there too, both MIS and FD are the same. Interest earned from both these is taxable.
Thus, in your case, the only consideration is the rate of return – since the FD is giving you 9.5% interest, it would be better if you invest in the bank FD.
i want to invest Rs.3 lakhs in POMIS , IAM APUBLIC SECTOR OFFICER WITH A GROSS INCOME OF 5 LAKHS. TAX SAVINGS ARE ALREADY CROSSING one LAKHS.WHETHER TO TAKE POMIS IN MY WIFE NAME OR GO FOR AN PLAIN BANK FD YIELDING @ 9.5%. MY CONCERN IS GROWTH AND TAX RELIEF ON INTEREST ACCRUED THROUGH BOTH SCHEMES
Hi,
I had invested 3 Lacs in MIS on 2002 and getting interest on regular basis.
Next to next year my MIS will mature. Suggest me what scheme should I opt to renew so that interest will be continue as this.
Thanks
Hi Inderjeet,
If you want to get regular interest and absolute safety, MIS remains the best option.
Other good option is a bank fixed deposit with monthly interest payment.
(Please read “Fixed Deposit (FD) – A favourite for generations” for more)
You can also save some tax if you invest in specific FDs for maturity 5 years or more.
(Please read “Fixed Deposits (FD) for saving income tax through section 80C” for more)
Two points to note, though:
1. MIS now has only 5% bonus (when you opened the MIS account, it would have been 10%).
(Please read “An introduction to Post Office Monthly Income Scheme (PO MIS)” for more)
2. If you opened the MIS account, it should have matured in 2008, as it is for 6 years. I am puzzled…
I had opened an post office Mis on 22-9-2005 amonuting to Rs 6 lac . whether Iam entitled for any bonus, if yes at what rate. Kindly clarify whether this bouns is paid sepretaley at the time of maturity. The date of maturity is 22-09-2005