Monthly Income Schemes are investment products structured to pay out a fixed sum of money each month. The schemes are offered to those in need of steady income while exposing themselves to less financial risk. Whether you are a retiree, a conservative investor, or someone looking to diversify your portfolio, MIS can be a dependable option to ensure steady returns.
In this all-inclusive guide, we delve into the most popular monthly income schemes in India, their features, eligibility criteria, benefits, and application processes.
Table of Contents
What is Monthly Income Scheme(MIS)?
In the world of finance, banks, post offices, and other financial institutions offer a variety of financial tools known as Monthly Income Schemes. These schemes ensure a steady flow of cash as a result of lump sum deposits. They offer guaranteed monthly payouts and are perfect for:
- Retirees who require stable income.
- Low-risk investors who prefer predictable returns.
- Families intending to generate a safety net for future expenditures.
Relatively Popular Monthly Income Schemes in India
Types of Monthly Income Schemes in India
- Post Office Monthly Income Scheme
- Bank Monthly Income Schemes
1. Post Office Monthly Income Scheme (MIS) Account
POMIS is a government-supported plan providing guaranteed monthly income with minimal risk. It is operated by the Indian Postal Department, thereby one of the safest investment products.
Features of POMIS
| Feature | Details |
|---|---|
| Interest Rate | 7.4% per annum (Jan-Dec 2024) |
| Minimum Investment | INR 1,000 |
| Maximum Investment | INR 9 Lakhs (Single) / INR 15 Lakhs (Joint) |
| Tenure | 5 years |
| Premature Withdrawal | 2% penalty (1-3 years); 1% penalty (3-5 years) |
Eligibility for POMIS
- Available to resident Indian citizens.
- Minors ( above 10 years of age) can apply through guardians.
POMIS Features
- Government backed security.
- Transferable account across post office
- Account can be opened as Joint account with one, two or three holders.
2. Monthly Income Plan offered by Union Bank of India
The offer of MIS by Union Bank yields good interest rates and on liberal terms. It is safe option for anyone in the lookout for regular income from their savings.
Features of Union Bank MIS
| Feature | Details |
|---|---|
| Interest Rate | Based on deposit tenure |
| Minimum Investment | INR 1,000 |
| Maximum Investment | No upper limit |
| Tenure | 6 to 120 months |
| Premature Closure | Allowed with applicable penalties |
Benefits of Union Bank MIS
- Guaranteed monthly payouts.
- Nomination and loan facilities available.
3. Monthly Income Plans of Bank of Baroda (MIP)
Bank of Baroda’s MIP is designed for those who require regular income to meet expenses. With extra benefits for senior citizens, it is a popular choice.
Features of Bank of Baroda MIP
| Feature | Details |
|---|---|
| Interest Rate | Based on deposit tenure |
| Minimum Deposit | INR 1,000 |
| Maximum Deposit | No upper limit |
| Tenure | 12 to 120 months |
| Senior Citizen Perks | Additional 0.5% interest |
Benefits
- Loan and overdraft facilities.
- Auto-renewal options.
- There is no penalty for deposits that are less than 5 lakhs of Indian rupees for a period of one year.
Comparison of Monthly Income Schemes
| Investment Option | Interest Rate | Risk Level | Lock-in Period | Tax Benefits |
|---|---|---|---|---|
| POMIS | 7.4% | Low | 5 years | No |
| Bank MIS | 3-5.6% | Low | Flexible | No |
| PPF | 7.1% | Low | 15 years | Yes |
| SCSS | 8.2% | Low | 5 years | Yes |
| NSC | 7.7% | Low | 5 years | Yes |
Benefits of Monthly Income Schemes
- Guaranteed Regular Income: Offers regular monthly returns.
- Low Risk Investment: Supported by government and other established agencies.
- Tenor Flexibility: Allows you to select a period according to the goal of investing.
- Accessible Account: Can be opened in the name of any adult, minor or jointly with some other account.
Tax Consequences of Monthly Income Schemes
Tax consequences are important and must be kept in mind while investing in the Monthly Income Scheme. The details are as follows:
- POMIS Tax Pattern
- No TDS (Tax Deducted at Source)
- Interest earned is fully taxable
- No tax benefits under Section 80C
- Income from Other Sources must be indicated as the tax status.
Bank Monthly Income Plans Tax Considerations
- TDS applicable if interest exceeds Rs. 40,000 per year (Rs. 50,000 for senior citizens)
- To avoid TDS, Form 15G/15H can be submitted.
- Banks provide TDS certificates quarterly
- Interest taxed at individual’s applicable tax slab
Comparing Monthly Income Schemes with Other Investment Options
| Investment Option | Interest Rate | Risk Level | Lock-in Period | Tax Benefits |
|---|---|---|---|---|
| POMIS | 7.4% | Low | 5 years | No |
| Bank MIS | 3-5.6% | Low | Flexible | No |
| PPF | 7.1% | Low | 15 years | Yes |
| SCSS | 8.2% | Low | 5 years | Yes |
| NSC | 7.7% | Low | 5 years | Yes |
How to Open an MIS Account
- Research Options: Compare interest rates and terms.
- Submit Documents: ID proof, address proof, and photographs.
- Make the Deposit: Investment via cash, cheque, or online transfer.
- Start Earning Income: Monthly installments start post-activation of account.
Documents Needed:
- ID proof (Passport/Voter ID/Driving License/Aadhaar)
- Address proof
- Recent passport-size photographs
- PAN card
Step-by-Step Procedure
- Select your desired institution (Post Office or Bank)
- Application form
- Submission of required documents
- Initial deposit
- Nomination facility setup
Premature Withdrawal Rules
POMIS Premature Withdrawal
- Less than 1 year: No benefits
- 1-3 years: 2% penalty
- 3-5 years: 1% penalty
Bank MIS Premature Withdrawal:
- Rules different for every bank
- Typically, 1% penalty on interest rate applicable
- Some banks are offering penalty-free withdrawal for deposit up to Rs. 5 lakhs
Who Should Invest in Monthly Income Schemes?
Monthly Income Schemes are specifically ideal for:
- Retirees: Require regular income for monthly expenses
- Risk-Averse Investors: Demand assured returns with no market-related risks
- Senior Citizens: They get higher rates of interest
- Conservative Investors: They have a preference for government-guaranteed securities
- Middle-Class Families: For additional monthly earnings
Maximize Returns on Monthly Income Schemes
- Invest for Multiple Tenures: Invest money in different tenure options
- Open Joint Account: Invest in multiple names to invest more
- Explore Options: Understand various schemes available for investment
- Save Tax Wisely: Ensure all documents submitted to save maximum tax
- Accrue Interest: Utilize the accrued monthly interest to grow wealth
Conditions to Apply to Monthly Income Plans
Conditions Applicable:
- Residency status in India
- Identity proof
- Address proof
- Age must be 18 or above
- Minor Accounts: Specific deals offered
Specific Sections
- Senior Citizens: Extra advantages
- Joint Account Holders: Three adults
- Minor Accounts: Guardian-controlled
Future of Monthly Income Plans
Monthly Income Schemes are changing with the flow of fluctuating market conditions. Current trends include:
- Digitalization: Opening and managing accounts from online mode
- Competitive Interest Rates: Interval rate adjustments as per the market
- More Add-ons: Extra facilities and flexibility
- Mobile Banking: To simplify account management
- Paperless Transactions: Green technology operations
Expert Suggestions
- Diversify Investments: Do not put all of your eggs in one basket; instead, diversify your investments.
- Consider Inflation: Factor in rising costs when planning
- Regular Review: Monitor interest rates and scheme performance
- Documentation: Maintain proper records and nominations
- Stay Informed: Be sure to stay aware of any policy changes or revisions.
FAQs on Monthly Income Schemes
Q1. What is a Monthly Income Scheme?
A: It is an investment plan that offers fixed monthly returns on a lump sum deposit.
Q2. Are MIS returns taxable?
A: Yes, interest earned is taxable according to the investor’s income slab.
Q3. Can I withdraw prematurely?
A: Yes, but with penalty charges as applicable according to the scheme and tenure.
Q4. Who can invest in MIS?
A: Resident Indian citizens, minors through guardians, and joint account holders are eligible.
Q5. Are these schemes risk-free?
A: Government-backed MIS, like POMIS, are very secure, thus risk-free.
Q6: What is the minimum investment amount for Monthly Income Schemes?
A: varies from institution to institution. The POMIS scheme has a minimum investment of Rs. 1,000 whereas banks have varied minimums as of Rs. 1,000.
Q7: Can an NRI make an investment under the Monthly Income Schemes?
A: No, Monthly Income Schemes are not available as of now to Non-Resident Indians
Q8: What happens on maturity of an MIS account?
A: One has to either close or reopen the account at the time of maturity. Auto-renewal is available under bank MIS.
Q9: Are MIS accounts transferable between branches?
A: Yes, POMIS as well as bank MIS accounts are transferable between branches within India.
Q10: How is interest computed and paid each month?
A: Interest is calculated on the principal amount at the prevailing rate and paid monthly to your linked savings account.
Conclusion
Monthly Income Schemes are best for investors who seek financial stability and guaranteed income. Whether it is a government-backed POMIS or a flexible bank MIS plan, there is always a suitable scheme for every investor. Evaluate your needs, compare schemes, and select one that suits your financial goals to ensure a secure and consistent income stream.
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