In India we have an investment option called “Post Office Monthly Income Scheme (MIS)”. Among other investment options, PO-MIS can also be considered suitable for investment by retired people.

But PO-MIS is not limited for retired people alone. Anyone with age above 18 years can open a PO-MIS account. An account can be open even on behalf of minors with age above 10 years.

So if you are one who is interested in alternative income generation, then PO-MIS can be your choice. It is one of those super-safe investment options where the invested capital is fully protected. Moreover, it can also earn some interest.

Though the offered interest rate is not high, but considering that it is a monthly income plan, and is almost risk-free, it is a good compromise.

Like banks, Post Office’s are spread all over India. They are even located in such places which may not have banks. That is why, banking facility offered by Indian Post Offices are so welcomed.

Let’s know more about this monthly income scheme (MIS) offered by our post offices.

PO-MIS IS SUITABLE FOR WHOM?

First of all this is a monthly income scheme. Hence anybody who wants to invest for monthly income generation can consider PO-MIS. But there is more to PO-MIS than income. They are super safe.

This is the reason why PO-MIS is recommended for retired people. The money invested in PO-MIS is almost risk free. Why? Because Indian post offices are controlled by Government of India.

PO-MIS is generally talked about as if it is scheme meant for retired people only. But it is not the case. Any Indian citizen can open a PO-MIS account. The age criteria required to open PO-MIS a/c is shown below:

POST OFFICE MONTHLY INCOME SCHEME (PO-MIS)

Bank fixed deposits can make payout each month. Similarly post office monthly income scheme (PO-MIS) can also render monthly payouts. The payout is made from the interest earnings. Check this comparison between bank FD and PO-MIS.

Depositors can invest a lump-sum amount in Indian post office. Under MIS scheme, the depositors savings account will be monthly credited with the predefined amount. The calculation for the monthly payouts is shown below:

Example: Suppose Raj & Ravi invests Rs.4.5 lakhs and Rs.9.0 lakhs respectively in PO-MIS. They have invested with an idea of generating a fixed income for next 5 years. Their deposit will yield an interest of @6.6% per annum. This way Raj will earn an income of Rs.2,475 and Rs.4,950 per month. [P.Note: Deposits made on behalf of minor is capped at Rs.3.0 lakhs]

HOW THE PAYMENTS ARE MADE?

When it comes to PO-MIS plan, there are two types of payments:

• Payment of Monthly Interests: The interest payable will be credited in the account holder’s SB account in the post office. ECS transaction are allowed in all SB accounts. Hence, one can activate ECS in ones SB account. This way, the MIS interest credited each month can be automatically transferred to ones preferred bank a/c (say ICICI, HDFC etc) on every due date. Else, ECS of interest directly to other bank account from MIS account is also possible. Read: How to save money.
• Payment of Principal On Maturity: Once the PO-MIS account gets matured, the investor can do two things. They can go to the post office and withdraw the principal amount in cash. Else, the maturity amount will be credited into ones SB account. One can then use ECS to transfer the amount to ones other bank account. Read: A guide on emergency fund building.

• HOW TO OPEN A PO-MIS ACCOUNT?

• Steps to open MIS account:

  • 1. SB A/C: If one does not already have a savings account (SB) in the post office, it must be opened first. Once the SB account is in place, one must approach for MIS account opening.
  • 2. FORM & DOCUMENTS: To open MIS account, first fill the account opening forma and submit it with proper document. The photo copies of the documents required here will be ID proof, address proof, and passport photographs.
  • 3. VERIFICATION: Original documents must be carried while submitting the photo-copy of the documents. The photo-copies will verified alongside the original documents.
  • 4. WITNESS: You will need the signature of a witness on the MIS account opening form. Better is to accompany the nominee with you. He/she can also work as a witness.
  • 5. DEPOSIT: To open the MIS account, the final step of making a deposit shall be completed. The minimum deposit amount in MIS account is Rs.1,000. Deposits must be made in multiples of Rs.1,000 only.

  • MATURITY & PREMATURE WITHDRAWALS

    Lock-in Period: Once the MIS account is active, the deposit amount gets locked for at least next 5 years from the date of account opening.

    Premature Closure: MIS account can be closed prematurely with a penalty. But the clause of premature closure will become active only after 1 year from the date of account opening. Means, the deposited amount gets compulsorily locked for at least 1 year. Request for premature closure can be applied only at a post office where the account stands.

    Penalty: There is a penalty clause. If the deposit is withdrawn within 3 years of account opening, the principal amount will be returned after deducting 2% of the deposit. If the deposit amount is prematurely withdrawn after 3 years, 1% of the deposit will be deducted.

    Reinvestment: The money parked in post office monthly income scheme can be reinvested bak into a new PO-MIS plan for another 5 years period. The reinvested money will be treated as a new account, and new/revised interest rates will be applicable.

  • RATE OF RETURN

    High Returns: Presently (on 21st May’20), the interest rate offered by PO-MIS is 6.6% per annum. Do not get me wrong, I’m not saying that 6.6% qualifies for high returns tag. But we have to compare apple-to-apple to know better.

    Here I will provide a list of banks and the interest rate offered by them today on a five year term-deposit.

    SL	Name of Bank	FD Interest (%)
    1	State Bank of India	5.70%
    2	Punjab National Bank	5.75%
    3	Bank of Baroda	5.70%
    4	Canara Bank	5.70%
    5	HDFC Bank	5.75%
    6	ICICI Bank	5.75%
    7	Axis Bank	5.10%
    8	Kotak Mahindra Bank	5.00%