Indian Post Office MIP (Monthly Income Plan)

How good investment is the Indian post office MIP as monthly income plan?

It is also called as Indian Post Office (IPO) “Monthly Income Scheme” (MIS).

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.

IPO MIP is similar to Bank’s Fixed Deposits

Bank fixed deposits can make payout each month.

Similarly 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 7.3% p.a.

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 IPO in multiples of Rs 1,500 with maximum of Rs 4.5 lakhs in single account.

Joint account:

For a joint account deposits can be made in multiples of Rs 1,500 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.

Income Payment:

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%.

Tax liability:

The interest earning from Indian post office MIP is taxable.

Premature withdrawal:

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.

2% Penalty:

If the amount is withdrawn after one year, but before three years. 

In this case 2% of the deposited amount will be deducted.

1% Penalty:

If the amount is withdrawn after three years, but before five years.

In this case 1% of the deposited amount will be deducted.

Death Benefit

In the event of death of the account holder, the nominee will be eligible for the death benefit.

  • Payment of interest or,
  • Withdrawal of the invested fund.

As this scheme is for senior citizens, it is always suggest to nominate more than one person as nominee for post office MIP.

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