Post office schemes, administered by the Ministry of Communications, deliver nine different small saving schemes. These schemes are very prominent among investors, in particular, because they are government-backed sovereign guaranteed. Fixed returns on investment are provided by various schemes offered by India Post. Both Recurring Deposit (RD) and Monthly Income Scheme (MIS) are offering an interest rate of 5.8 and 6.6 per cent, respectively, for the current quarter among all other saving schemes that the Post Office offers. The interest rates are not market-linked and therefore generate guaranteed returns. Know what they deliver and how they work if you are puzzled between both these schemes.
Minimum and maximum investment threshold
- There is no maximum contribution cap in the context of a recurring deposit. The depositor can make a minimum deposit of Rs 100 per month or any amount in multiples of Rs.10.
- On the other side, the maximum investment cap that an individual can make is Rs 4.5 lakh in a single account and Rs 9 lakh jointly in the case of the Monthly Income Scheme. Remember that it is important to make these investments in multiples of Rs 1,000.
- The interest rates are compounded on a quarterly basis in the context of recurring deposit. It currently provides 5.8 per cent interest rate per annum.
- Interest is payable monthly on the Monthly Income Scheme. At present, 6.6 per cent per annum is provided by this scheme. Both these schemes offer higher interest rates than what most of the banks are offering presently if we consider their fixed deposits.
Premature withdrawal facility
- Depositors can withdraw up to 50 per cent of the balance after 1 year from their RD account. The depositor can also reimburse the amount of lump sum along with interest at any point during the tenure of the account.
- An investor can prematurely encash after 1 year from his or her MIS account. If someone withdraws before 3 years, a penalty of 2% will be charged accordingly. It can be withdrawn at a discount of 1 per cent of the deposit after 3 years.
- Post office RD scheme comes with a maturity period of 5 years and also can be extended for a further of 5 years. By submitting an application at the PO account office, a depositor can do the same.
- The Monthly Income Scheme has a maturity period of 5 years. In case the primary account holder dies before the maturity period the account will be closed and the nominee / legal heirs will be refunded.