Post Office Monthly Income Scheme - MIS Interest Rate 2022

A monthly Income Scheme (MIS) is an investment scheme that promises the investor guaranteed returns at an interest rate of 6.60% per annum. These returns can be availed as fixed monthly income.

Post Office Monthly Income Scheme (POMIS) is an investment scheme of the Indian postal service. It promises the investor guaranteed returns at 6.60% per annum in the form of fixed monthly income. Seasoned investors consider MIS to be one of the smartest investment plans to park funds as it gives you three merits – keeps your capital intact, yields better returns than debt instruments, and assures a fixed monthly income. 

Urban investors are often reluctant to make an investment in POMIS. It looks very old world but so as you know it was the post office, that introduced banking services in India and is still the largest banking service provider in the country. Being administered by the Ministry of Finance, it boasts of far greater credibility than any other form of investment.

Key Features of Post Office Monthly Income Scheme

• POMIS account is transferable from one post office to another. The best thing is that it can be done absolutely free of cost.

• For every post office deposit, you make a separate account has to be opened. The good thing is that one person can open ‘N’ number of accounts (of course up to the upper limit).

• The maturity amount realized at the end of the term can be reinvested in POMIS.

• The investor can also appoint a nominee for his Post Office Monthly Income Scheme account. So, in case of his unfortunate demise, his nominee becomes entitled to get his money.

• The good news is that there is no TDS (Tax Deduction at Source) here to eat away your capital. The bad news is that the interests so earned are taxable.

• The maturity term for MIS is 5 years. Ideally, you should withdraw the amount after 5 years. At the end of the term, you’ll get back every single penny that you had invested. Needless to say, you keep getting your fixed monthly income for this whole period. However, if you have to withdraw the money before 5 years, here’s what happens.

• Withdraw the deposit within 1 year – You get nothing

• Withdraw the deposit in 1 -3 years – You get your deposit back after a nominal 2% deduction (as a penalty)

• Withdraw the deposit after 3 years - You get your deposit back after a nominal 1% deduction (as a penalty)

Disadvantages of POMIS

• Post Office Monthly Income Scheme does not offer any tax rebate under section 80C. Simply put, the amount invested in POMIS is not tax-deductible.

• If the monthly payouts are not withdrawn, they sit idle and do not yield any interest.

• There is no TDS on the Post Office MIS, but the interest income is taxable in your hands. 

How does POMIS Works?

Making an investment in Post Office Monthly Income Scheme is as easy as a pie and requires minimal documentation. The investor needs to submit a copy of the address proof and identity proof (passport/PAN card/ration card/voter identity card) and passport size photographs.

To get started, the investor needs to open an account. He can opt for either an individual account or a joint account. The table below shows the minimum and maximum amount that can be invested in Post Office Monthly Income Scheme.

Mr. Sharma chooses to make an investment in MIS. He invests Rs 4,50,000 with a maturity period of 5 years. At an annual interest rate of 6.6%, he should get a fixed payout of Rs 2,475 every month (this figure can be summed out very easily on a Post Office Monthly Income Scheme calculator available online). At the end of the investment tenure, he’ll get his deposit money back.

The money can be withdrawn in two ways, either directly from the post office or get credited to your savings account through ECS. The money is usually meant to be withdrawn on a monthly basis. However, the investor can let it accumulate over a few months and then withdraw it but it’s not of much use as the idle money will not earn you any interest.

To make Post Office Monthly Income Scheme more effective at yielding returns, a new feature was added to it. The investor has the option of combining it with a recurring deposit wherein the interest that you earn on a monthly basis is invested in a recurring deposit. This, in turn, lets your money grow even more money. 

Eligibility Criteria for POMIS

POMIS has been designed for risk-averse investors, with a big no to equity instruments, hunting for a source of fixed monthly payouts. It is most aptly suited to the needs of senior citizens and retired people who have just entered the no-more-paychecks zone and are ready to make a one-time investment with the sole purpose of getting a safe regular income so as to maintain their lifestyle. Simply put, Post Office Monthly Income Scheme is for those who are looking for a long-term regular source of income.

The only pre-requisite is that the investor should be a resident Indian. NRIs cannot make an investment in Post Office Monthly Income Scheme. The best thing about this post office savings scheme is that the lower cap on the entry age is set at 10 years. So, even a 10-year-old minor can open a POMIS account in his name. The maximum amount that a minor can invest is separate.

Post Office Monthly Income Scheme vs. Monthly Income Plans?

People often get confused between the Monthly Income Scheme and Monthly Income Plan. To make it worse the Monthly Income Plan itself is used both in the context of insurance and mutual funds. Here are the essential differences between the three. Hopefully, it’ll bust out the misconceptions once and for all.

POMIS Revised Interest Rate 

Post Office Monthly Income Scheme has faced a steep decrease in the interest rate from 8.40% to 6.60%, payable monthly. The interest rate prior to April 1, 2016, was 8.40%. Here, it is important to know that the income earned by interest through this scheme is taxable. In addition, an individual can invest a maximum of Rs. 4,50,000 in Post Office Monthly Income Scheme. This amount includes his/her share in the joint accounts. The minimum deposit is Rs. 1,000 and deposits are accepted in the multiples of Rs. 1,000. 

Here is a table that represents the New MIS Interest Rates:

The Verdict

The Monthly Income Scheme is surely an effective investment tool that efficiently deploys the capital to earn guaranteed monthly income for you throughout the investment tenure. Moreover, it comes with the infallible backing of the government. No wonder, Post Office Monthly Income Scheme is an all-time favorite among old aged, retired people and risk-averse investors.