| Post Office Monthly Income Scheme Posted: 13 Dec 2010 12:00 AM PST
Couple of weeks ago, I wrote about Monthly Income Plans or MIPs, and this week I'm going to write about a similar monthly income scheme from the Indian post office called the Post Office Monthly Income scheme. This is a fixed income scheme which provides you a guaranteed return on your investment, and is meant for people who are looking for a monthly source of income without taking any risk at all. Where the mutual fund MIP invests a part of its assets in equity, and even gold in some cases – and may sometimes even get you a higher than 10% return (with commensurate risk of course) this scheme has a fixed rate of return and is meant for people looking for an ultra safe investment. Here are some features of this scheme. Post Office MIS Interest RateThis is a scheme from the Indian postal service that earns you an interest of 8% per annum, and generates a monthly income for you. So if you invest Rs. 100,000 in it – your annual interest at 8% will be Rs. 8,000, and you will get Rs. 666.67 monthly. Post Office MIS TenureThe maturity period of the scheme is 6 years, at the end of which you will get your money back. You cannot redeem your money within a year, but after that you can redeem it after paying a penalty. Here is how that works. Less than 1 year: MIS can't be encashed. 1 – 3 years: You are penalized 2% of deposit. After 3 years: You are penalized 1% of your deposit. 5% BonusIf you retain your Post Office MIS till maturity (6 years) – at the end of the time period you will be given a 5% bonus on your deposit. Minimum and Maximum InvestmentThe minimum sum you can invest is Rs. 1,500, and you can go up to Rs. 450,000 in case of a single account, and Rs. 900,000 in case of a joint account. Tax on Post Office MISThere is no TDS on the Post Office MIS, but the interest income is taxable in your hands. The interest income from post office MIS used to be tax free under section 80L, but that section has been withdrawn from April 1 2005. Interest can be automatically credited to your bankAt the time of opening the scheme you can give in your bank account details, and interest will be automatically credited to your bank every month. Transfer from one post office to anotherThere is a provision that allows you to transfer your money from one post office to another. So, if you opened your account in one post office, and moved to another place you can fill up a transfer form with them, and move your scheme to another post office. ConclusionThis scheme is meant for people who are looking for an ultra safe investment and a regular source of monthly income on top of it. A lot of retired people will fall under this category, and if you fall under that category then you need to evaluate other options like the Senior Citizens Savings Scheme before you invest in this scheme. I"ll cover that scheme in the days to come, and if you have any questions about this particular scheme or any other observations please leave a comment.  |
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Special Info:
If you really don't need regular Income, then Invest the MIS Amount in R.D in either Post office itself or some other banks of your choice to improve the Over all return.
Say for E.x: you are making an Investment of 30,000 in MIP, you can get Rs. 200 p.m.
If you can Invest this amount in Post office R.D( @ 8% Interest Rate), see the below Cash flow:
At the End of 6 Years:
Principal: Rs. 30,000/-
Bonus(5%): Rs. 1,500/-
R.D Maturity Value: Rs.18,527/-
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Total: Rs.50,027
Effective Interest rate is @ 8.65 approximately. If you are investing the monthly amount in some other bank which gives higher return, you can improve the Effective Interest rate.
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