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Introduction

India Post Office runs several savings schemes to enable people from rural and urban areas to save prudently. These schemes also offer one of the highest interest rates in the market for any savings scheme. Moreover, these schemes are backed by the government, so they are safer and more secure compared to other schemes in the market.

The Post Office Monthly Income Scheme is a fixed deposit scheme that gives regular monthly income to the depositor. The depositor can make a one-time lump sum investment in the account and start receiving monthly income from the next month.

This scheme is beneficial for retirees and pensioners who wish to receive a regular monthly income with their retirement corpus or pension settlement. However, the scheme is open to all citizens equally.

Features of Post Office Monthly Income Scheme

Post Office Monthly Income Scheme is a straightforward savings scheme. It is not linked to market returns and hence offers a safe and reliable investment avenue.

  • One can open the account individually or jointly with 2 other persons.
  • This account can be opened with a minimum investment of Rs.1000 and further in multiples of Rs.100. The maximum investment allowed by an individual is Rs.4.5 lakhs.
  • One can open multiple accounts in multiple post offices across the country. However, the total deposit should cumulatively not exceed the Rs.4.5 lakhs.
  • Current interest rate is at 6.6%. The interest amount shall be paid upon completion of the first month of deposit.
  • Interest amount can be withdrawn as cash at the post office. You can also opt for direct debit into your post office savings account.
  • The account can be transferred to any other post office within the country.

Who is eligible to open the Post Office Monthly Income Scheme?

This account can be opened by the following people:

  • A resident Indian can open an individual account
  • Up to 3 individuals can open an account jointly
  • A legal guardian can open on behalf of a minor
  • A legal guardian can open on behalf of a person of unsound mind
  • A minor above 10 years can open in their own name

How to deposit money into the account?

The account opening form is available at your nearest post office. Fill in the form and submit the following documents:

  • KYC Form 
  • PAN Card
  • Aadhaar card
  • If Aadhaar card is not available, the following documents can be submitted: 
    • Passport 
    • Driving license 
    • Voter’s ID card 
    • Job card issued by NREGA signed by the State Government officer
    • Letter issued by the National Population Register containing details of name and address
    • Proof of date of birth/birth certificate in case of minor account. (Birth certificate is mandatory for Sukanya Samriddhi Account).
  • For Joint Account, KYC documents for all joint holders to be submitted
  • For minor account, KYC detail of guardian to be submitted

Points to be noted: 

  • Conversion of a joint account to a single account or vice versa is not permitted.
  • Upon becoming a major, the minor must send a new account opening form and KYC document to the Post Office concerned for the transfer of the document under his/her name.
  • For contributions above Rs. 10 lakhs, as per the Prevention of Money Laundering Act-2002, evidence of the source of the investment must be given.
  • For senior citizens investing their VRS amount, proof of the pension payment is to be given.

How much money can one invest in the Post Office Monthly Income Scheme?

  • A minimum of Rs.1000 is sufficient to open the Post Office Monthly Income Scheme
  • Investments are to be made in multiples of Rs.1000
  • One can invest a maximum amount of Rs. 4.5 lakhs in a single account and up to Rs. 9 lakhs in joint account
  • An individual is allowed to invest a maximum of Rs. 4.5 lakh in the scheme (including his share in joint accounts)
  • For calculation of share of an individual in a joint account, each joint holder has an equal share in each joint account.
  • Account opened as a legal guardian of a minor is considered separately

How is the interest calculated on the account?

  • The current rate of interest on the Post Office Monthly Income Scheme is at 6.6% per annum (as of 1st April 2020)
  • Interest is due at the end of one month from the date of opening and so on till maturity.
  • If the interest accrued on a monthly basis is not asserted by the account holder, that interest shall not accrue any extra interest.
  • In the event of any additional deposit made by the depositor, the excess deposit will be refunded and only PO Savings Account interest will be extended for such amounts from the date of the opening of the account to the date of the refund.
  • Interest may be withdrawn or auto credited to your Post Office savings account in the same post office or via ECS. In the case of a MIS account at CBS Post Offices, monthly interest can be added to the savings account kept at any CBS Post Office.
  • Interest amount is taxable in the hands of the depositor.

Premature Closure of Post Office Monthly Income Scheme Account

If you are in need of some emergency funds, you may choose to prematurely close your Post Office Monthly Income Scheme.

  • You cannot withdraw the account before one year of account opening. After one year, the accounts can be pre-closed after the deduction of penalty charges.
  • If you choose to close the account after 1 year and within 3 years from the date of opening of the account, a debit equal to 2% will be taken from the balance and the remaining balance will be paid.
  • If you pre-close it after 3 years and within 5 years from the date of opening of the account, a debit equivalent to 1% will be taken from the principal and the remaining amount will be paid.
  • To close the account, you have to submit an application form and enclose your pass book to the postal office concerned.

What happens when the account matures?

The Account may be closed at the end of 5 years from the date of opening. You can close the account and withdraw the balance amount by submitting the required application form along with the Passbook to the Post Office concerned.

In case of death of the account holder before the maturity date, the account will be automatically closed and the balance amount shall be refunded to the nominee/legal heirs. Interest shall be offered up to the corresponding month in which the refund is made.

Maturity amount shall be paid in the following modes: 

  • Below Rs. 20000 - by Cash
  • Rs. 20,000/- or above – through Account Payee Cheque or Transfer to PO Savings Account

Nomination

  • Nominating your legal heir is necessary to make sure that the amount reaches the right person in case of your death.
  • Nomination is mandatory while opening the account. 
  • One can nominate up to 4 people on the account. 
  • If you want to change the nomination during the tenure of the deposit, you can do so by submitting the prescribed application at the Post Office.

Charges and Fees for Opening and Operating the account

Issue of duplicate pass book 

Rs. 50

Issue of statement of account or deposit receipt

Rs. 20 in each case

Issue of pass book in lieu of lost or mutilated certificate

Rs. 10 per registration

Cancellation or change of nomination 

Rs. 50

Transfer of account

Rs. 100

Pledging of account 

Rs. 100

Issue of cheque book in Savings Bank Account

No fee for up to 10 leafs in a calendar year and thereafter Rs. 2 per cheque leaf

Charges on dishonour of cheque

Rs. 100

What are the tax benefits of the Post Office Monthly Income Scheme?

The Post Office Monthly Income Scheme does not offer any tax benefits to the investor. Neither the deposited amount nor the interest accrued are eligible for tax deductions. However, it is exempted from TDS and therefore, the tax liability is in the hands of the taxpayer.

FAQs

1. Can I transfer my Post Office Monthly Income Scheme from one post office to another?

Yes, you can transfer it, provided, the post office is a CBS enabled post office. You can submit an application form at the relevant post office and submit your passbook. They will verify the details with the other post office and transfer the account. You will be notified via SMS about the transfer and then you can go and collect the passbook with the new account number.

2. How can a legal heir claim the balance amount in the account in case of death of the account holder and absence of nomination?

In case of death of the account holder, and without a nomination, the legal heir can claim the balance amount by submitting the following documents:

  • Legal evidence to prove that he is the legal heir - Probate of will, Letter of Administration, Succession Certificate
  • Claim Form
  • Death certificate of account holder(s)
  • Passbook/certificate
  • Id and address proof of the claimant(s)
  • ID and address proof of two witnesses

3. What will happen if the legal heir neither possesses a valid nomination or any legal heir document?

In case of absence of nomination or legal documents, the heir can produce the following documents to claim the amount. However, it is applicable only for deposits up to Rs.5 lakhs.

  • Claim Form
  • Death certificate of account holder(s).
  • Passbook/certificate.
  • Affidavit (Form-13)
  • Letter of disclaimer (Form-14)
  • Letter of indemnity (Form-15)
  • Id and address proof of the claimant(s)
  • Self attested copy of ID and address proof of two witnesses

4. Can NRIs invest in this scheme?

No, only resident Indians can invest in this scheme. NRIs cannot invest in this scheme.

5. Can this scheme be operated jointly? What is the investment amount limit for joint accounts?

Yes, up to 3 individuals can come together to open a joint account. The maximum permissible investment under joint accounts is Rs.9 lakhs. However, it is considered that each person has an equal share in the investment. Therefore, the individual share cannot exceed Rs.4.5 lakhs cumulatively under all the Post Office Monthly Income Scheme accounts he holds.

6. Can minors open this Post Office Monthly Income Scheme account?

Yes, minors over the age of 10 can open an account in their own name. Legal guardians and parents can also open this account in the name of a minor.

7. What is the minimum amount required to open this account?

Applicants can open this account with a minimum amount of Rs.1000 and thereafter in multiples of Rs.100. The maximum permissible deposit is Rs.4.5 lakhs.

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