Safety and the constant stream of income are the requirements for many of us. The best product for such investors is Post Office Monthly Income Scheme or MIS. Let us try to understand about the features of this scheme.
# Who can open Post Office Monthly Income Scheme or MIS ?
An individual in single or jointly with one or more adults together can open this account. An individual can be guardian to the minor kid or of unsound mind individual. If the kid’s age is more than 10 years, then he can open and operate the account on his own. However, HUF or NRIs not allowed to open this account.
# What is the minimum and maximum limit of Post Office Monthly Income Scheme or MIS ?
This is the one-time investment product. You invest a lump sum and start to earn monthly income. The minimum amount you can invest is Rs.1,500 and the maximum limit is Rs.4,50,000.
If you have a joint account, then you can invest up to Rs.9,00,000. You can open as many accounts as you can. But the combined limit under your head must not cross Rs.4,50,000 (including joint account you are holding).
Let us say Mr.X opened the account with the deposit of Rs.2,00,000 individually. Along with this, he opened one more account with his wife Mrs.X in joint name. In this joint account, he deposited Rs.5,00,000. Then for Mr.X the total investment is Rs.2,00,000 from his account and Rs.2,50,000 from the joint account. So his limit for investing in Post Office Monthly Income Scheme or MIS for Mr.X is exhausted.
However, for Mrs.X the investment is considered as Rs.2,50,000 only (50% of the joint account investment). Hope this is clear now.
But do remember that Mr.X can open one more account in his kid’s name as a guardian. For such minor accounts, Mr.X individual limits will not be considered. I noticed that few portals mentioned that minor account is a maximum limit of Rs.3,00,000. However, the same is not mentioned on Post Office portal.
Let us say if someone opened the joint account with three members and the amount deposited is Rs.9,00,000. Then, for consideration of maximum limit, the deposited amount is equally considered among all depositors. Like for all individuals, it is Rs.3,00,000.
You can convert the individual account to joint account and vice versa. If the account is opened in the name of minor, then you have to inform to post office and convert it to the normal account.
# What if you deposit more than the prescribed limit?
If post office department come to know about such breach of limit, then they inform you to immediately withdraw the excess amount. Such excess deposited money will earn only post office savings account interest rate. The period will be from the deposit of such excess amount to the end of the month preceding the month in which the depositor has been requested to withdraw such excess amount in the account.
# What is the rate of interest of Post Office Monthly Income Scheme or MIS currently?
Currently for 1st April, 2016 to 30th June, 2016, the interest rate is 7.8%. The interest rate will change on a quarterly base. However, you will get the interest of what it is during the time of deposit. I wrote a detailed post on these interest rate calculation changes in my post “Post Office Savings Schemes -Changes effective from 1st, April 2016“.
Do remember that interest rate nowadays changes for all Post Office Schemes on a quarterly basis. However, for you, the interest at the time of depositing will be applicable for you throughout the 5 years period.
# How you receive the interest in Post Office Monthly Income Scheme or MIS?
The interest will be payable on a monthly base. Let us say you deposited the money on 3rd June, 2016. You will r the money from 3rd July, 2016. The date of a payout will be 3rd of every month as you deposited the money on 3rd of June.
# What is the tenure of Post Office Monthly Income Scheme or MIS?
Earlier it was 6 years. Now it is reduced to 5 years.
# What if you not withdraws the money after 5 years?
After the completion of 5th year, if you not withdrawn the amount and interest, then such accounts will earn the simple interest of post office savings account up to 2 years ONLY. After that period, it will be kept idle forever.
# Whether nomination facility is available in Post Office Monthly Income Scheme or MIS?
Yes, one can nominate to this investment either at the time of investment or during the tenure of a scheme. If you want to nominate after opening the account, then write an application and submit it at the concerned post office along with passbook.
#What are the tax benefits of Post Office Monthly Income Scheme or MIS?
While investing in this scheme, you will not get any tax benefits. Also, whatever the interest you receive on monthly base is taxable income for you. The one big relief is that there is no TDS on such interest payout. But keep in mind that if there is no TDS means you can’t avoid from paying tax. Because it is taxable income. You have to show the interest income and pay the tax as per your tax slab.
The money deposited in this scheme will be exempt from wealth tax.
# How you can receive the interest?
There are three ways to receive the money.
- Automatic credit to post office savings account-The interest will be directly payable to your post office savings account. In case of MIS accounts standing at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post offices. If you not claim the interest rate, then such earned interest will not carry any further interest accumulation.
- Application for withdrawal-The depositor will submit the application for interest withdrawal every month. He will receive the interest either in cash or cheque as per the wish of the depositor.
- Through post dated cheques-The validity of such cheques will be for 3 months after the date of such cheque. This facility can be availed only if the cheque amount is more than Rs.100. In the event of loss of cheques by the payee, duplicate cheques will be issued only after the payee has signed an indemnity bond and the reconciliation period (validity period of the cheque plus one month reconciliation time) has elapsed. In the event of preclosure of account, then account depositor must return the unused cheques along with a penalty of Rs.4 per each such cheques. In the event of a death of a depositor, nominee or legal heir will have to return such unused cheque but they no need to pay any penalty on this. At the end of 5th year, account holder receives the amount through cheque only.
If the interest payout due date is on Sunday or postal holiday, then the interest will be credited on immediate preceeding working day.
Let us say you opened the account on 31st July, 2016. Then every month interest will be payable on 31st. However, few months will not have this date. In such a situation, the interest will be payable on last day of that month. Means on 30th of that particular month where there is no 31st day and in case of February it is either on 28th or 29th of February.
# Whether premature withdrawal available?
Yes, but only after a year. If you withdraw after a year but before 3 years, then they deduct 2% on your invested amount. If you withdraw after 3 years but before the completion of 5 years, then they deduct 1% from your invested amount as penalty.
# Any bonus payable at maturity?
As of now there is no such facility. However, accounts opened on or after 8.12.07 and up to 30.11.2011 enjoy the 5% bonus at maturity. It means, if you deposited Rs.1,00,000 initially, then at maturity you will receive Rs.1,05,000. Now such bonus facility is not available.
# How you can deposit money?
You can deposit the money in cash, cheque or DD drawn in favour of the depositor or the Postmaster of the post office and endorsed in favour of the Postmaster.
# What happens if depositor dies?
The nominee or legal heir must close the account. They are not allowed to continue the account. The deposited amount along with the interest (up to the month preceding the month in which refund is made) will be payable to legal heir or nominee.
# What happens if a depositor dies in case of a joint account?
Once the death of the joint holder, the account will be treated as single account in the name of surviving account holder. Then as per the surviving depositor’s maximum limit of investment, the account will continue. If post office found excess deposit in such a situation, then the surviving depositor must withdraw such excess amount immediately. If the interest is already paid as per MIS rates, then such excess interest will be adjusted in future monthly interest payout.
# Whether we can transfer this account from one post office to another?
Yes, the account can be transferred from one post office to another post office across India.
# Whether monthly interest can be automatically deposited into Post Office RD?
No, it will not be deposited automatically. The interest of MIS will be deposited to post office savings account. From there, you can deposit to RD account.
# How to open the Post Office Monthly Income Scheme or MIS?
You have to submit the following documents for opening the account.
- Address Proof
- Two passport size photographs
- Identity Proof – like Passport, PAN Card, Ration Card, Voter Identity Card issued by the Election Commission of India
You have to carry original documents also to carry out KYC procedure.
Who can invest Post Office Monthly Income Scheme or MIS?
The monthly income generated from this scheme is taxable income. Hence, the 7.8% current interest may goes down if you calculate the exact return of post tax. However, the only thing that keeps people invest in such schemes is the constant stream of income.
We Indians first look for safety to our principal and returns on that. But we never bother whether such low or negative real return affect us or not. If you are very much happy with SAFETY and kind of around 7.8% return then definitely go for it.
This scheme may be paradise for those who looking for fixed return from Government.