These days people have become more concerned about managing their finances and hence looking for more options to invest in for a better and safe financial future. Coming to investment point only a few of us knows that India Post is also related to Indian banking services. Post office throughout our country offers its customers to invest in, providing the option of different savings scheme through which you can get a decent amount of interest. Among which recurring deposit (RD) accounts and monthly income scheme (MIS) accounts are the most popular one.

With both of the plan Post office RD and monthly Income scheme, one can not only increase their savings but can also grow their money. One’s deposits in any of these schemes can fetch an interest up to 7.3 percent p.a. on completion of the maturity period.

Fixed Deposits v/s Savings Accounts v/s RD Accounts

Both the schemes recurring deposits and monthly income scheme offer a guaranteed return and there is no risk factor involved as in stock and share market. Your return is guaranteed and not all dependent on the market or any other parameter.

Let’s Understand These Two Schemes One by One in a Better Way.

Post Office Monthly Income Scheme

  • The maturity period of Post office MIS is 5 years. Hence, one who is investing in MIS can avail all the benefits only if he/she continues till 5 years.  
  • One can start a post office monthly income scheme account with a minimum amount which should be multiple of Rs. 1,500. The invested amount can be increased thereafter.
  • The maximum investment limit is Rs. 4.5 lakh for a single MIS account and Rs. 9 lakh for a joint MIS account.
  • In case the customer is compelled to withdraw the money invested before 5 years, the following are payable benefits-   

Withdrawal within 1 year: The customer will receive 0 benefits.

Withdrawal between 1 to 3 years: The customer will receive the complete deposited amount after a nominal deduction of 2% as a penalty.

Withdrawal after 3 years: The customer will get the complete deposited amount after a nominal deduction of 1% as a penalty.

  • Minors are also allowed to invest in a POMIS, which means if you want to save some money for your child you can easily do it with a post office MIS.
  • Customers are allowed to have nominees. In case he/she is not alive at the time to maturity the maturity benefits can be availed by the nominees.
  • There are no Tax Deductions for post office MIS scheme. However, the interest gained through the investment done in this scheme is taxable.
  • The interest rate on deposit in post office monthly income scheme account (MIS).
  • An investment in post office monthly income scheme account can give you an interest of 7.3 percent per annum payable monthly.
Maturity Period 5 years
Interest rate 7.3% per annum payable monthly
Minimum Investment One can start with a minimum amount of 1500
Upper cap (single account) 4.5 lakhs
Upper Cap (joint account) 9 Lakhs
Tax Deduction It doesn’t fall under Section 80C and the income is subject to taxation. However, there is no TDS either

How to Open a Post Office Monthly Income Scheme?

Opening a post office monthly income scheme is very easy.
Follow these steps to open one

  • Get a POMIS application form from your nearest post office.
  • Submit the filled form in the post office.
  • You need to submit the Xerox copy of your ID proof, residential proofs and 2 passport-size photos along with the filled application form at the post office.
  • Carry the original documents for verification in case needed.
  • You need to get the signatures of your witness on the form.
  • You have to provide nominee against for your account.
  • You can make the first deposit via cash or cheque.

Post Office Recurring Deposit

  • Post office RD’s have a maturity period of 1 year, 2 year, 3 years and 5 years.
  • One requires a minimum of Rs. 10 per month to start an RD with Indian post office. The amount invested can be in multiples of Rs. 5. However, there is no maximum limit on the amount invested.
  • The account can be opened by cash or cheque both and can be transferred from one post office to another as per the customer’s convenience.
  • One can open any number of RD accounts in a post office as there is no restriction on this.
  • Nominees are also allowed in this scheme. And a joint RD account can be opened by two individuals.
  • Interest rates offered on post office recurring deposits (RDs).
  • Post offices RD offer an interest of 6.9 percent which is quarterly compounded.
  • On the maturity, Rs. 10 accounts will get Rs. 717.43.
  • An RD account can also be continued for another five years on a year-to-year basis in terms to get better returns.
Maturity Period 1 year, 2 years, 3 years and 5 years
Interest rate it offers an interest rate of 6.9 percent per annum with quarterly compounded
Minimum investment One can start with a minimum of Rs.10
Upper Cap There is no limit on the amount invested but it should be in multiple of 5
Tax Deduction Tax exemption can be availed for a post office RD under section 80C which is up to Rs.1,50,000 limit.

Interest is chargeable to tax and an interest of more than Rs.10,000 per annum is applicable to TDS of 10%

Investment Options to have Regular Monthly Income

How to Open Post Office Recurring Deposit Account?

  • A recurring deposit can either be opened with a bank or with the post office.
  • To open it with banks it can be done online but to open it with the post office you need to visit your nearest post office branch.
  • Take an RD opening form from there and fill it.
  • You need to submit the filled form in the post office itself.
  • The office will guide you further about the documents you need to submit.
  • Generally, documents for Identity proof, address proof such as PAN and Aadhar are required along with your photograph.
  • The amount deposited should be in multiples of 5 and can be deposited via cash or cheque both.

For the accounts opened between 1st and 15th day of a calendar month, the deposits can be made up to 15th of the next month while for the accounts opened between 16th and the last working day of a calendar month, the deposits can be made up to the last working day of the next month, as per the India Post website.

A default fee will be charged for each default, should the subscriber fail to make the subsequent deposit. The rate of default fee is @₹0.05 for every ₹5. The account becomes discontinued after 4 regular defaults. A discontinued account can be revived in 2 months, failing which no further deposit can be made.

(Updated 18-07-2019)