Types of Savings and Investment
Post Office Monthly Income Scheme
This scheme offers a guaranteed return on investments made in post offices. Interest on deposits is paid monthly to scheme holders. A minimum deposit of ₹1500 needs to be made to avail this scheme. The maximum investment that one can make in this scheme is ₹4.5 lakh singly or ₹9 lakh if held jointly. This account can be held either singly or jointly. Premature withdrawals can be made, but after paying a penalty.
How to Open a Monthly Income Scheme Account?
- Fill the account opening form
- Two passport-size photographs.
- Address and identity proof – any of the following – Aadhaar card, driving license, voter ID, passport, ration card, PAN card, or declaration in form 60 or 61 as per the Income Tax Act.
- Choose a nominee
Interest Rate Mechanism
For the MIS Scheme, interest is 7.7% p.a. payable monthly. The interest rate is linked to G-Sec rates. The interest rate is subject to change as and when G-Sec rates change, but once a MIS begins, the interest rate prevailing at the time of starting the MIS would hold till maturity.
For example, if one deposits ₹50000, the person would receive a monthly interest payout of ₹320 till maturity.
There is no tax relief for Monthly Income Scheme account holders. The interest earned is subject to taxation. TDS is not deducted from the interest earned.
Risk associated with Monthly Income Scheme
There is no risk involved as these deposits are backed by the Government of India. Principal and Interest are guaranteed. If inflation turns out to be higher than the nominal interest rate of the Scheme, there would be no real returns available. Hence, it is not inflation protected.