Post office monthly income scheme is for individuals who are less risk averse and looking for safe investment option with decent returns. The scheme is backed by the Government of India and hence there is ample safety.

Post Office schemes generally assure guaranteed returns on your investment, ideal for people who are looking for monthly income without bearing risk. There is option of transferring account from one post office to another.

Interest Rate on MIS

The interest rates applicable as of now is 8.40% per annum which is payable monthly. Government changes interest rates once in a year considering inflation.

Interest can be drawn through auto credit into savings account standing at same post office, through PDCs or ECS./In case of MIS accounts standing at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post offices.

Investment

Account can be opened by cash/cheque and in case of cheque the date of realization of cheque.

Account may be opened by individual. In multiples of INR 1500/-. Maximum investment limit is INR 4.5 lakhs in single account and INR 9 lakhs in joint account.

An individual can invest maximum INR 4.5 lakh in MIS (including his share in joint accounts).

For calculation of share of an individual in joint account, each joint holder have equal share in each joint account.

Joint Account

Joint account can be opened by two or three adults. Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts. All joint account holders have equal share in each joint account. However, there is a option of convertin single account into Joint and Vice Versa.

Minor Account

Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account. Minor after attaining majority has to apply for conversion of the account in his name.

Nomination

Nomination facility is available at the time of opening and also after opening of account.

Withdrawal

Maturity period is 5 years from 1.12.2011.

Can be prematurely en-cashed after one year but before 3 years at the discount of 2% of the deposit and after 3 years at the discount of 1% of the deposit. (Discount means deduction from the deposit.)

A bonus of 5% on principal amount is admissible on maturity in respect of MIS accounts opened on or after 8.12.07 and up to 30.11.2011. No bonus is payable on the deposits made on or after 1.12.201.

Taxation

There is no tax deduction at source. And this scheme will not fall under the purview of Section 80C. Means that you cannot claim for any tax exemption on the amount. While the interest earned is taxable.

Should You Invest in the Post Office Monthly Income Scheme?

Interest rates on the post office monthly income scheme are not very great. In fact, they maybe slightly lower than that offered by banks.

Banks too offer immense security along with slightly higher interest rates. Since there is no tax benefit they may not necessarily be the best investment option around.

Hence, you can decide to only park a small portion of your requirement in the Post Office Monthly Income Plan and diversify into safe company fixed deposits like Kerala Transport Development Finance Corporation (backed by Government of Kerala with interest of 10%) and other bank deposits.

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