One day I was discussing with my father regarding good investment options for retired people. Our discussion ended with a conclusion that out of all investment options Indian post office MIP is best for retired people. The reason why we concluded this is because Indian post office covers almost all part of India, even rural areas. Indian post office will be present in those remote-places which does not have a bank. Moreover Indian post office MIP can give regular and reliable monthly income to its investors. In old age what else one needs apart from safety & reliability. Indian post office MIP is controlled by Government of India. Hence it is considered as one of the safest investment options for retired individuals. I will personally recommend Indian post office MIP for widows as it is least complicated. Indian Post Office MIP is in a real sense a risk-free investment. The return offered by this MIP is also reasonably good. This MIP not only gives steady income but also protects the principal amount.
Indian Post Office MIP is similar to Bank’s Fixed Deposits
Like in fixed deposits, where the payout is made each month, Indian post office MIP also effects monthly payouts. The payout is made from the interest earnings. A depositor can deposits a lump-sum amount in Indian post office. Under MIP scheme, he can earn monthly interests on his deposited amount. At present the rate of interest offered on deposits in Indian Post Office for MIP is 8.5% per annum with effect from 01-April-2012. All deposits in MIP of Indian post office shall be made either in cash, cheque or demand draft. Only one deposit is allowed in one MIP account. Money can be deposited to MIP account in Indian Post Offices in multiples of Rs 1,500 with maximum of Rs 4.5 lakhs in single account. For a joint account deposits can be made in multiples of Rs 1500 with maximum limit of Rs 9.0 lakhs. Earlier Indian Post Offices used give 5% bonus on maturity of 5 years, but this scheme has now been shelved from Dec’2011.
At present majority Indian banks offers interest rate of 9% on fixed deposits of 5 years. The interest income from fixed deposits can also be cashed each month. The monthly income from fixed deposit gets deposited in linked savings account (after tax adjustments)s . In the same way, in Indian Post Office MIP scheme, interest income gets credited to the savings account of Post Office. A person who wants to start MIP in post office should first open a savings account in post office to make MIP work. The interest earning of Indian post office MIP will does not get credited to any other banks savings account. If one does not have saving account in post office then he has to approach post office and ask for cheque payment. In this case he has to visit post office each month to claim payments. In case the interest portion of MIP is not claimed by the depositor (cheque payment) will not earn any interest. But if one has post office savings account it will pay interest of 4%. The interest earning from Indian post office MIP is taxable.
Deposits in post office for purpose of generating MIP has a lock-in period of 5 years. There is a possibility of withdraw the money after one year but this can be done by paying a penalty.
> If the amount is withdrawn after one year but before three years then 2% of the deposited amount will be deducted.
> After three years but before five years the penalty percentage will be 1% of deposited amount.
In the event of death of the account holder of post office MIP scheme, the nominee will be eligible for the payment of interest or withdrawal of funds. As this scheme is for senior citizens, I will suggest that better to nominate more than one person as nominee for post office MIP.