Post Office Monthly Income Scheme Vs Recurring Deposit: Here’s how they work

If you are confused between both these schemes, know what they offer and how they work.

Run by the Ministry of Communications, Post office schemes offer 9 small saving investment schemes. These schemes are quite popular among investors, especially because these schemes are sovereign guaranteed – backed up by the government. Various schemes offered by India Post offer fixed returns on investment.

Among the savings schemes that the Post Office offers, Recurring Deposit (RD) and Monthly Income Scheme (MIS) are offering an interest rate of 5.8 and 6.6 per cent, respectively, for the current quarter. These schemes are not market-linked. Hence, both the schemes offer guaranteed returns. If you are confused between both these schemes, know what they offer and how they work.

Here is how both the schemes work:

Investment Limit

1. In case of Recurring Deposit, there is no maximum limit on investment. A minimum deposit of Rs 100 per month or any amount in multiples of Rs 10 is needed to be made by the depositor.

2. On the other hand, in the case of the Monthly Income Scheme, the maximum investment limit that an investor can make is Rs 4.5 lakh in a single account and Rs 9 lakh jointly. Note that these investments should be done in multiples of Rs 1,000.

Interest rates

1. In the case of Recurring Deposit, the interest rates are compounded quarterly. Currently, it offers 5.8 per cent per annum, compounded quarterly.

2. The interest on the Monthly Income Scheme is payable monthly. Currently, it offers 6.6 per cent per annum.

Advance/Premature Withdrawal

1. In the case of the RD account, depositors can withdraw up to 50 per cent of the balance after 1 year. Also, the depositor can repay the amount in lumpsum along with interest at any time during the currency of the account.

2. With the MIS account, an investor can prematurely encash after 1 year. However, if you withdraw before 3 years, it will come at a discount/deduction from the deposit of 2 per cent of the deposit. After 3 years it can be withdrawn at a discount of 1 per cent of the deposit.

Account Maturity

1. The RD account also comes with a maturity period of 5 years, however, the account can be extended for further 5 years. A depositor can do so by giving an application at the PO account office.

2. The maturity of the Monthly Income Scheme is 5 years.