All About Post Office Monthly Income Scheme (PO-MIS): Generate Fixed Income

Small savings schemes are a perfect investment for those not looking for high risks. The Indian Post Office offers many schemes that give fixed returns on investments. The Ministry of Finance recognizes these schemes. Post Office offers The Post Office Monthly Income Scheme (PO-MIS) is one such scheme. This government-backed scheme is a very safe investment option. It is ideal for those looking to earn some interest. The post office runs it, making it accessible in areas where there are no banks. This also strengthens the investors’ confidence that their money is safe. Many treat it like an alternate or an extra source of income that comes in monthly. Even though the interest rate is not very high, its risk-free factor makes it very sought after.

This article details everything you need to know about this saving scheme.

Features Of The Post Office Monthly Income Scheme (PO-MIS) 

i. It is a small saving scheme backed by the government.

ii. The minimum investment is of ₹1500.

iii. You can further invest in multiples of ₹1000.

iv. 5 years is the minimum lock-in period of this investment.

v. After the tenure, the investor can withdraw the investment or can choose to re-invest it.

vi. The minimum age to open this account is 18 years.

vii. Minors of 10 and above can have an account opened on their behalf.

viii. The interest rate is under the control of the Central and Finance Government. They have the power to change it depending on the government bonds. Currently, the interest rate for Q1 FY20-21 (April – June 2020) is 6.6%.

ix. There are mainly two types of accounts; individual and joint accounts. A person can be a part of an individual and joint account together.

x. A single person can choose to invest in many accounts. Their sum of deposits should never exceed ₹5 lakhs.

xi. The deposits in a joint account should never exceed ₹9 lakhs.

xii. The account holders will receive the earnings every month. This does not mean the beginning of every month but one month from the first investment.

xiii. One needs to have a Post Office Savings Account to invest in this scheme.

Benefits Post Office Monthly Income Scheme (PO-MIS) 

1. Reliability

PO-MIS is a government-backed scheme and comes under the Finance Ministry. This offers you capital protection. Many people are afraid that saving schemes are unreliable, thus refrain from investing. PO-MIS offers reliability; many other schemes cannot. Thus with this, investors need not worry about fraudulent investment schemes.

2. Far And Wide Reach

The Post Offices control it, which makes it reachable to a larger population in India. Post offices are usually present everywhere. Their reach extends from the metropolitan cities to the most remote areas. Banks are usually not accessible to a wide variety of Indians due to their select locations. This makes post office saving schemes a big success in our country. Which further makes this scheme very popular among the urban and rural population.

3. Flexibility

The deposit you make allows you to determine your path on your own. There is no fixed amount you have to deposit. You can decide as per your affordability. You can choose to deposit any amount as long as it is in multiples of ₹1000As long as it is under ₹4.5 lakh and over ₹1500. There is also an option of having a joint account. This shows that PO-MIS has many options available. One can freely choose the one which suits them best.

4. Stability

This scheme is unbothered by any market risks. Thus, the investor is not under stress and worry about their investment when the market dips. No matter what the market condition is, the scheme remains unchanged. Under PO-MIS, you earn the interest on your investment every month. An interest rate of 6.6% is the fixed rate. These guaranteed returns can act as an alternate income providing some financial stability.

5. Tax Benefits

The income earned through PO-MIS is taxable. This scheme does not fall under Section 80C, like many other money-saving schemes. It has no Tax deducted at Source (TDS). This helps investors by increasing their monthly earnings.

6. Movement Of Funds

The Post office has added a feature in this scheme, which is to move your funds. The investor now has the option to move their funds to a Recurring Deposit (RD). This is an excellent option as it yields higher interests due to a much higher interest rate. Thus, if any investor feels unsatisfied with their earnings under PO-MIS, they can opt to transfer to an RD.

7. Withdrawal

The earnings are directly deposited into a savings account or the post office. The account holder can choose to deposit the earnings to either one of these places. After maturity, the investor can choose to either withdraw the deposit or reinvest it.

8. Nominees

This scheme allows the investor to set nominees in place. Thus, in the event of the account holder’s death, all further amounts go to the nominee. This includes the interest due and the principal amount.

9. Transfer Of Account

Post offices are available all over India. Thus, if the investor moves to another state, they can shift their PO-MIS account also. This includes their investment corpus and interest disbursal. This transaction helps you keep an eye on your investment’s progress also. It a smooth process that helps you provide extra security.

10. Reinvestment

After the tenure, 5 years, are over the account has the option to withdraw the amount or re-invest it. They have an option of reinvesting this same money into a new PO-MIS account.

11. Premature Withdrawal

One can opt for premature withdrawal the principal amount. For this, they have to pay a penalty. The option to withdraw your amount becomes active only after 1 year from the date of opening. The account will have to apply for a request for premature closure at the post office.

12. Joint Account

Post Office Monthly Income SchemePO-MIS allows no more than three people to pool in their money and open this account. In this case, each investor has equal rights over the account and its earnings. The benefit of this is that, one can invest a large sum of money without any problems.

13. Minor Account

PO-MIS allows an adult to open an account in the name of a minor. The individual takes over the account when they turn 18. This allows the parent/guardian to plan early and save for their child’s future. This low-risk scheme with guaranteed returns helps solidify money for children.

Who All Should Invest In Post Office Monthly Income Scheme PO-MIS Account

All Indians above the age of 18 looking for a steady monthly income should invest in this scheme.  Minors above the age of 18 can also have someone invest for them. This scheme is almost risk-free and offers guaranteed returns. Senior citizens and retired persons generally favor it. This scheme is thus usually recommended to those who are in the no-paycheck-zone.

But, this does not mean that others can’t invest in it. In fact, Post Office Monthly Income Scheme PO-MIS is often recommended to first time investors. It is a one-time investment that can provide a regular income. Investing in this scheme is a good starting point. They are able to get comfortable with the workings of investments. This should be a necessary step before they take on higher risk projects.

Non-Residential Indians (NRI) and Hindu Undivided Families (HUF) are not allowed to invest.

Procedure To Open A Post Office Monthly Income Scheme PO-MIS Account

Opening an account is a very simple task with few steps. Before getting into the steps, it is mandatory to have a post office savings account. Along with this, you must also have a monthly income scheme (MIS) account. Both of these accounts are important to receive the interest generated. Now the steps to open a PO-MIS account are-

i. Get the POMIS form from your nearest post office.

ii. Submit the following documents at your post office.

• a filled PO-MIS application form
• Copy of your ID
• Residential proof
• 2 passport size pictures

iii. Make sure to carry the original documents for verification purposes.

iv. You must have one witness with you at the post office at that time. They must sign on the form. If the investor is choosing a nominee, they too should go with them.

v. The last step is to make the deposit. You can do this through a cheque or cash. If you choose to make the deposit through a check, the date written on is the account opening date. The interest generated on the investment is deposited one month from this date.

After completing these steps, your Post Office Monthly Income Scheme PO-MIS account is open.

The working Of Post Office Monthly Income Scheme PO-MIS

The investment one makes for this scheme is a one-time deposit. The deposit earns interest, which is already declared. The investor receives the interest earned on a monthly basis. They have an option to either use this money or reinvest it. At the end of the tenure, the investor gets the original deposit. They can get this money back by 2 ways. They can either go get it or go get it in their bank account with the help of ECs. If the investor chooses to withdraw the investment before tenure, they have to pay a penalty.

Withdrawal Of Post Office Monthly Income Scheme PO-MIS

After making the deposit, there is no more work for the account holders to do. Now they sit back and receive their payments. There are two ways one receives the payments

a. Monthly

The interest earned through this investment comes to you on a monthly basis. These interest payments go straight to your savings bank account. Savings accounts allow electronic clearing. Thus, one can transfer these interests earned to another account in their bank of choice.

b. On Maturity

The investor is receiving monthly interest payments through the tenure. After the scheme has matured, the investor must collect the principal amount. They can do this in two ways.

• Withdraw the principal amount in cash at their nearest post office.
• Credit the principal amount into their savings bank account. Through electronic transferring, they can shift this entire amount to another bank account.

The holder can continue to earn interests on this investment for up to 2 years after maturity. This is applicable if they have not withdrawn the investment by that time. An interest of 6.6% is applicable.

Early Withdrawal

If the account holder is not happy or has some financial crisis, they can withdraw their deposit. This does not happen without paying a penalty. The penalty charges are as follows-

Different Accounts Under Post Office Monthly Income Scheme PO-MIS

i. Single Account

• Must be above 18 years of age
• The deposit should not exceed ₹5 lakhs
• The interest rate is 6.60%
• The lock-in period of 5 years
• The monthly income on interest earned is ₹2,745. If the individual has invested ₹5 lakhs they, in totality will receive ₹29,700
• It is permissible to convert a single account into a joint account

Example

Ankur has decided to invest ₹4.5 lakh in Post Office Monthly Income Scheme. As a first-time investor he chose this scheme due to its low- risk and guaranteed returns factors. He is 23 years old and was looking for an investment scheme which will help support his lifestyle. With an interest of 6.60%, his monthly earnings are ₹2,745. He does not have any plans to withdraw his investment prematurely. Thus, is looking to gain an interest of ₹29,700 after 5 years. Thus his total earnings are ₹29,700 + ₹4,50,000 = ₹4,79,700.

ii. Joint Account

• There can be a maximum of 3 people holding this account together.
• They must all be above 18 years of age.
• The deposit should not exceed ₹9 lakhs.
• The interest rate is 6.60%.
• The lock-in period of 5 years.
• The monthly income on interest earned is ₹4,950. If the joint account had an investment of ₹9 lakhs then they, in totality will receive ₹59,400.
• It is permissible to convert a joint account into a single account.

Example

Ritu, along with her 2 friends, Seema and Rajni has decided to jointly invest in PO-MIS. They all have made an investment of ₹3 lakhs each, thus a total investment of ₹9 lakhs. They are all looking forward to their monthly earnings. Since they invested an equal amount, the interests are also equally divided. With an interest of 6.60%, the investment will generate an income of ₹4,950 monthly. Their total earnings will be ₹59,400. Thus, Ritu and her 2 friends will each receive ₹1650 on a monthly basis. Their total earnings will be ₹59,400. Their total individual earnings will be ₹19,800.

iii. Account Held For A Minor

• The minor for which is being held must be above 10 years of age
• The person holding the account must be above 18 years of age
• The deposit should not exceed ₹3 lakhs
• The interest rate is 6.60%
• The lock-in period of 5 years
• The monthly income on interest earned is ₹1,650
• The minor must apply to get the account changed to their name when they turn 18. After this, the account is in control of the minor (now adult)

iv. Account Held By A Guardian On Behalf Of A Person Of An Unsound Mind

• Must be above 18 years of age
• The deposit should not exceed ₹5 lakhs
• The interest rate is 6.60%
• The lock-in period of 5 years
• The monthly income on interest earned is ₹2,745

Comparing Post Office Monthly Income Scheme PO-MIS With Other Saving Schemes

Post Office Monthly Income Scheme (PO-MIS) vs Pradhan Mantri Vaya Vandana Yojana (PMVVY)

1. Investment limit- The limit of PO-MIS is 9 lakhs whereas for PMVVY it is 15 lakhs.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for PMVVY it is 7.40%.

3. Lock-in period – The lock-in period for PO-MIS is 5 years whereas MPVVY has a 10-year lock-in period.

4. Tax Benefits – Both do not have any tax benefits and do not have tax deducted at source.

5. Premature Withdrawal –PO-MIS allows this but the account holder has to pay a penalty. PMVVY also allows it but it is very difficult to withdraw the deposit.

6. Income – Account holders of PO-MIS get the income earned through this scheme monthly. Whereas PMVVY offers a choice to get it monthly, quarterly, half-yearly or yearly.

Post Office Monthly Income Scheme (PO-MIS) vs Bank Fixed Deposit (FD)

1. Investment limit- The limit of PO-MIS is 9 lakhs whereas for FD it is 5 crore.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for FD it is 5.70%.

3. Lock-in period – The lock-in period for PO-MIS is 5 years whereas FD has a 10-year lock-in period.

4. Tax Benefits – Both do not have any tax benefits. But, PO-MIS does not have tax deducted at source whereas FD does.

5. Premature Withdrawal – Both schemes allow this but the account holder has to pay a penalty.

6. Income – Account holders of PO-MIS get the income earned through this scheme monthly. Whereas FD holders have a choice to get it monthly, quarterly, half-yearly or yearly.

Post Office Monthly Income Scheme (PO-MIS) vs Post Office Savings Account (POSA)

1. Investment limit- The maximum limit for PO-MIS is 9 lakhs whereas non for POSA. The minimum limit of PO-MIS is ₹1500 whereas for POSA it is ₹ Further a minimum balance of ₹500 is necessary at all times in POSA.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for POSA it is 4.0%.

3. Lock-in period – The lock-in period for PO-MIS is 5 years whereas none for POSA.

4. Tax Benefits – PO-MIS does not have any tax benefits. The interest earned is taxable. However, in POSAthere are some tax benefits. Interest up to 10,000 is not taxable.

5. Income – Account holders of PO-MIS get the income earned through this scheme monthly. For POSA holders there is no fixed income which is withdrawn. They can access the account as per their wish. They must deposit or withdraw money once in three years. This is important to keep the account alive and not let it go dormant.

6. Types – Both have four types of accounts. The two mains are single and joint accounts. The additional are, account held for minor and account held for person with unsound mind.

7. Method to open – Investor can use either cheque or cash to open a PO-MIS account. Whereas, an investor can only use cash to open a POSA account.

Post Office Monthly Income Scheme (PO-MIS) vs National Savings Certificate (NSC)

1. Investment limit- The maximum limit of PO-MIS is 9 lakhs whereas none for NSC. The minimum limit for PO-MIS is 1500 whereas for NSC it is 1000.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for NSC it is 6.8%.

3. Lock-in period – Both have a lock-in period for 5 years.

4. Tax Benefits – PO-MIS does not have any tax benefits. But, NSC gets tax rebate of 1.5 lakh under Section 80C.

5. Premature Withdrawal – Both schemes allow this but the account holder has to pay a penalty.

6. Income – Account holders of PO-MIS get the income earned through this scheme monthly. Whereas in NSC, holders can only have access to the amount after maturity.

7. Loans – PO-MIS cannot act as a guarantee against loans but NSC can.

8. Types – PO-MIS has four types of accounts whereas NSC has five types.

Post Office Monthly Income Scheme (PO-MIS) vs National Savings Recurring Deposit Account (RD)

1. Investment limit- The maximum limit for PO-MIS is 9 lakhs whereas none for RD. The minimum limit of PO-MIS is ₹1500 whereas for POSA it is ₹ Further a minimum balance of ₹500 is necessary at all times in POSA.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for RD it is 5.8%.

3. Lock-in period – Both have a lock-in period for 5 years.

4. Tax Benefits – PO-MIS does not have any tax benefits. The interest earned is taxable. However, in POSA there are some tax benefits. Section 80C is applicable on interest earned under this scheme.

5. Premature Withdrawal – Both schemes allow this but the account holder has to pay a penalty. In RD, it is only allowed after 3 years.

6. Income – Account holders of PO-MIS get the income earned through this scheme monthly. For RD account holders, they can only withdraw their money on maturity.

7. Types – Both have four types of accounts. The two mains are single and joint accounts. The additional are, account held for minor and account held for person with unsound mind.

8. Method to open – Investor can use either cheque or cash to open both a PO-MIS and an RD account.

Post Office Monthly Income Scheme (PO-MIS) vs National Savings Time Deposit Account (TD)

1. Investment limit- The maximum limit of PO-MIS is 9 lakhs whereas none for TD. The minimum limit for PO-MIS is 1500 whereas for TD it is 1000.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for TD it varies on the time period. It is 5.5% for one year.

3. Lock-in period – PO-MIS has a lock-in period for 5 years. Whereas TD account holders get to choose how long their lock-in period Is for (1-5 years).

4. Tax Benefits – PO-MIS does not have any tax benefits. But, TD gets tax benefits under some circumstances only. Only a 5 year TD can get the benefit of Section 80C.

5. Premature Withdrawal – Both schemes allow premature withdrawal but the account holder has to pay a penalty. In the case of TD, it is not allowed before 6 months.

6. Income – Account holders of PO-MIS get the income earned through this scheme monthly. Whereas SCSS holders get the income earned annually.

7. Types – Both have four types of accounts. The two mains are single and joint accounts. The additional are, account held for minor and account held for person with unsound mind.

8. Method to open – Investor can use either cheque or cash to open both a PO-MIS and a TD account.

Post Office Monthly Income Scheme (PO-MIS) vs Senior Citizen Savings Scheme Account (SCSS)

1. Age Limit – The age limit for PO-MIS is 18 above. Whereas, for SCSS it is 60 above. 50 and 5 years olds are allowed but only under special circumstances.

2. Investment limit- The maximum limit of PO-MIS is 9 lakhs whereas 15 lakhs for NSC. The minimum limit for PO-MIS is 1500 whereas for SCSS it is 1000.

3. Interest rate – The interest rate for PO-MIS is 6.60% whereas for NSC it is 7.4%.

4. Lock-in period – Both have a lock-in period for 5 years.

5. Tax Benefits – PO-MIS does not have any tax benefits. But, SCSS gets tax rebate of 1.5 lakh under Section 80C. Also, TDS is applicable if interest is more than 50,000.

6. Premature Withdrawal – Both schemes allow premature withdrawal but the account holder has to pay a penalty.

7. Income – Account holders of PO-MIS get the income earned through this scheme monthly. Whereas SCSS holders get the income earned quarterly.

8. Method to open – Investor can use either cheque or cash to open both a PO-MIS and a SCSS account.

Post Office Monthly Income Scheme (PO-MIS) vs Public Provident Fund (PPF)

1. Investment limit- The maximum limit of PO-MIS is 9 lakhs whereas 1.5 lakhs for PPF. The minimum limit for PO-MIS is 1500 whereas for PPF it is 500.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for NSC it is 7.1%.

3. Lock-in period – PO-MIS has a lock-in period for 5 years and PPF has one for 15 years.

4. Tax Benefits – PO-MIS does not have any tax benefits. But, NSC gets tax rebate of 1.5 lakh under Section 80C.

5. Premature Withdrawal – PO-MIS allows premature withdrawal this but the account holder has to pay a penalty. In the case, of PPF premature withdrawals are not allowed.

6. Income – Account holders of PO-MIS get the income earned through this scheme monthly. Whereas in PPF, holders can only have access to the amount after maturity.

7. Loans – PO-MIS cannot act as a guarantee against loans but PPF can.

8. Method to open – Investor can use either cheque or cash to open both a PO-MIS and a SCSS account.

Post Office Monthly Income Scheme (PO-MIS) vs Kisan Vikas Patra Account (KVP)

1. Investment limit- The maximum limit of PO-MIS is 9 lakhs whereas none for KVP. The minimum limit for PO-MIS is 1500 whereas for NSC it is 1000.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for KVP it is 6.9%

3. Lock-in period – PO-MIS has a lock-in period for 5 years and KVP has one for 10 years and 4 months.

4. Tax Benefits – Both schemes, PO-MIS and KVP do not have any tax benefits.

5. Premature Withdrawal – Both schemes allow this but the account holder has to pay a penalty.

6. Income – Account holders of PO-MIS get the income earned through this scheme monthly. Whereas in KVP, holders can only have access to the amount after maturity.

7. Loans – PO-MIS cannot act as a guarantee against loans but PPF can.

Post Office Monthly Income Scheme (PO-MIS) vs Sukanya Samriddhi Account

1. Investment limit- The maximum limit of PO-MIS is 9 lakhs whereas 1.5 lakhs for SS. The minimum limit for PO-MIS is 1500 whereas for SS it is 250.

2. Interest rate – The interest rate for PO-MIS is 6.60% whereas for SS it is 7.6%.

3. Lock-in period – PO-MIS has a lock-in period for 5 years. Whereas SS has one for 21 years.

4. Tax Benefits – PO-MIS does not have any tax benefits. But, SS gets tax rebate of 1.5 lakh under Section 80C.

5. Premature Withdrawal – Both schemes allow this but the account holder has to pay a penalty. SS only allows this after 18 years.

6. Income – Account holders of PO-MIS get the income earned through this scheme monthly. Whereas in SS, holders can only have access to the amount after maturity.

Frequently Asked Questions (FAQs)

Bottom Line

Investing in Post Office Monthly Income Savings has to be well thought out. Investing a large amount then having to withdraw it before 5 years is a problem one can face. But it’s risk-free and safe nature makes it a very good investment options for retired citizens. This article provides you with all the knowledge you would need about this scheme.