Apart from Sovereign guarantee, MIS has higher interest rate than FDs and the payout is also more frequent.
Are you thinking of making lump sum investment for a relative staying away at hometown or for your child studying at a different place so that he or she may get some regular money in hand for monthly expenditures? If yes, Post Office Monthly Income Scheme (MIS) would be an ideal choice.
It’s like a fixed deposit (FD) with monthly payout of interests and is currently offering an interest rate of 7.7 per cent. As the interest is payable monthly, the effective yearly interest rate becomes equivalent to about 7.98 per cent.
Like other Post Office small savings schemes, investments in MIS also bear the Sovereign guarantee of the Government of India and thus are fully secure. The rate of interest on MIS is also higher than the rate offered by banks on 5-year FDs, in which the interest is accumulated on quarterly basis.
Apart from Sovereign guarantee, MIS has higher interest rate than FDs and the payout is also more frequent, but unlike FDs, MIS has a ceiling on maximum investments. While the minimum investment is Rs 1,500, the maximum limit of investment in MIS is Rs 4.5 lakh in a single account and Rs 9 lakh in a joint account. So, a person investing jointly Rs 9 lakh may get a monthly interest payout of around Rs 5,775.
So, you may jointly invest in MIS and open a Post Office Savings Account in the name of the dependent at a place where he or she lives, so that the monthly interest may be transferred through auto credit into the savings account standing at same post office, through PDCs or ECS. The dependent will be able to withdraw and spend the interest amount on monthly basis, while the principal amount will remain intact.
However, MIS is not suitable for individuals having taxable income, as there is no tax benefits on the interest earned. It is also not suitable for senior citizens as the interest rate is lower than the Senior Citizen Savings Scheme (SCSS), which currently offers 8.7 per cent interest rate.
So, it may also suit individuals having non-taxable salary, if they have lump sum money to put.
Ten little know facts about MIS:
- An MIS account can be opened in the name of minor.
- A 10-year old minor may open and operate an account.
- A joint account can be opened by up to three adults.
- Each joint holder have equal share in each joint account.
- A single account can be converted into a joint account and vice versa.
- In case of investment by cheque, the date of realisation of cheque in government account shall be date of opening of account.
- Nomination facility may be availed either at the time of opening an account or after opening one.
- A person may open any number of accounts in any post office, subject to maximum investment limit by adding balance in all accounts.
- An account may be transferred from one post office to another.
- An MIS may be en-cashed prematurely after one year but before 3 years with a penalty of 2 per cent of the deposit and after 3 years with a penalty of 1 per cent of the deposit.