Post Office Recurring Deposits (RD) Compared With Monthly Income Scheme (MIS)
India Post, which also deals with banking services, offers to its customers the option of recurring deposit (RD) accounts and monthly income scheme (MIS) accounts. With deposits in either of these schemes, you can not only increase your savings but also grow your wealth as your deposits will fetch an interest rate up to 7.3 per cent over a maturity period of five years. Both post office recurring deposits and monthly income scheme offer guaranteed returns as they are not linked to stock or bond markets.
Given below are features of and comparisons between post office recurring deposit (RD) and monthly income scheme (MIS):
Post office recurring deposit (RD) accounts:
Like a usual bank recurring deposit, post office recurring deposit also needs you to make payments at regular intervals of two, three and five years. You need to deposit a minimum Rs 10 per month or any amount in multiples of Rs 5, according to the website of India Post - indiapost.gov.in. There is no maximum limit on the recurring deposit instalment. The tenure of a post office RD is up to five years.
Post office recurring deposit account can be opened via cash or cheque. It can be transferred from one post office to another. Subsequent deposits can be made up to 15th day of next month if the account is opened up to 15th of a calendar month, and up to the last working day of next month, if it is opened between 16th day and last working day of a calendar month.
If subsequent deposit is not made up to the prescribed day, a default fee at Rs 0.05 for every Rs 5 will be charged. After four regular defaults, the account is discontinued and can be revived in two months but if the same is not revived within this period, no further deposit can be made. If in any recurring deposit account, there is a monthly default amount, the depositor has to first pay the defaulted monthly deposit with the default fee and then pay the current month deposit.
A rebate is offered on advance deposit of at least six installments in post office recurring deposit account. One withdrawal up to 50 per cent of the balance is allowed after one year. It may be repaid in one lump sum along with interest at the prescribed rate at any time during the currency of the account.
Interest rate on post office recurring deposit (RD) accounts:
Post office recurring deposit (RD) accounts offer a quarterly-compounded interest rate of 6.9 per cent per annum. A Rs 10 recurring deposit account - in which the subscriber contributes Rs 10 every month to the account - fetches Rs 717.43 on maturity. The account can be continued for another five years on a year-to-year basis.
| Particular | Post Office RD | Post Office MIS |
|---|---|---|
| Maturity | one year, two years, three years and five year maturities | The lock-in period for Post Office MIS is 5 years. |
| Minimum Amount | It can be opened with a minimum of Rs 10/- per month or any amount in multiples of Rs 5/-. | You can start with a nominal initial investment of Rs. 1500. |
| Upper Limit | There is no upper limit on the amount to invest each month | You can open more than one account in your name. But the total deposit amount cannot exceed Rs. 4.5 lakhs in all of them together. |
| Interest | Currently it offers an interest rate of 6.9 per cent per annum with quarterly compounded. | You earn income in the form of interest every month. The returns are not inflation-beating, but is higher compared to other fixed income investments like FD. For instance, if Mr Sharma has invested Rs. 5 lakh in the post office monthly investment scheme for 5 years. As mentioned above, the interest rate is 7.3%. His monthly income will be Rs. 3,250 for that period. |
| Tax | The Post Office 5 year RD also comes under the tax exemption under section 80C up to Rs.1,50,000 limit. The interest is chargeable to tax as per tax slab and interest of more than Rs.10,000 per annum is applicable to TDS of 10%. | Post office MIS doesn’t fall under Section 80C and the income is subject to taxation. But it has no TDS either. |
(As told by Rahul Agarwal, Director, Wealth Discovery/EZ Wealth.)
Post office monthly income scheme account (MIS)
The minimum amount required for opening a post office monthly income scheme account should be in multiples of Rs 1,500. It can be increased thereafter. The maximum investment limit is Rs 4.5 lakh in single account and Rs 9 lakh in joint account. An individual can invest maximum Rs 4.5 lakh in MIS (including his share in joint accounts). For calculation of share of an individual in joint account, each joint holder should have equal share in each joint account, according to the India Post website.
The maturity period of an MIS is five years. Interest can be drawn through auto credit into savings account standing at the same post office.
Post office monthly income scheme account can be prematurely en-cashed after one year. But if you encash it before three years, the post office deducts 2 per cent of the deposit. If you encash it after 3 years, 1 per cent of your deposit is deducted.
Interest rate on post office monthly income scheme account (MIS)
Deposits in post office monthly income scheme account fetch an interest rate of 7.3 per cent per annum payable monthly.
