PO Monthly Income Scheme Vs PO Time Deposit
There are a lot of post office saving schemes offered by post office in India to the people having variety of investment needs. This set of financial instruments encourages saving and provide financial security to the people of India.
As these Post Office schemes are backed by the government, they are safe and reliable investment avenues for the individuals. Post offices in India offer their services to the people through a vast network of over 1.55 lakh post offices and around 5.70 lakh employees.
Post Office Monthly Income Scheme (POMIS): POMIS is a reliable investment option for those who want to get steady monthly income. The POMIS was introduced by the Indian government to provide a safe avenue for regular income. It is preferred by those who do not have any regular source of income or retirees.
PO MIS provides capital protection since it is backed by the government. Further, you earn a guaranteed interest rate (currently 7.4%) every month. Unlike stocks, POMIS is not affected by market volitility. You can easily start investment in the scheme with as little as Rs.1,000.
Post Office Time Deposit (TD), a fixed deposit option offered by India Post. The government introduced time deposit to encourage safe and disciplined savings which will grow steadily over time and help creating a handsome corpus. TD is available in 4 tenure options. TD provides a fixed interest rate ranging from 6.9% to 7.5% according to investment tenures.
Time Deposit scheme offers flexible tenures so you can choose from 1, 2, 3 or 5 years. Whether short term or long term, it is your call. It is very easy to open TD account for which you just need to visit your nearby post office, fill up a form and deposit a lump sum amount.
5-year TD qualifies for tax deduction under Section 80C of Income Tax Act, 1961. TD account can also be pledged as security, if required.
Two important post office saving schemes offered by post office in India are Post Office Monthly Income Scheme (POMIS) and Post Office Time Deposit (POTD). Both offer investment benefits but they differ in objective of investment. Let us check out major differences between POMIS and POTD in order to make proper investment decision.
| Basis for Difference | Post Office Monthly Income Scheme (POMIS) | Post Office Time Deposit (POTD) |
|---|---|---|
| Purpose | POMIS provides regular fixed monthly income on deposit of a lump sum amount in POMIS account | POTD offers guaranteed returns at competitive interest rates. POTD is similar to a bank fixed deposit with a few elementary differences |
| Interest Rate (p.a.) | 7.4% per annum payable monthly |
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| Payment of Interest | Interest is paid every month on completion of a month from the date of opening and so on till maturity | Interest is paid annually |
| Minimum Investment | Rs.1000, in multiples of Rs.1000 thereafter | Rs.1000 |
| Maximum Investment |
| No Limit |
| Eligibility | Individuals including Minors | Individuals including Minors |
| Who Should Invest | Persons who want guaranteed and regular monthly income | Persons who want to invest for a fixed tenure to achieve a desired financial objective |
| Tenure | 5 Years | 1-year, 2-years, 3-years and 5-years |
| Tax on Interest Earned | Taxable as per tax slab | Taxable as per tax slab |
| Tax Implication | Does not qualify for the 80C deductions. However no TDS will be made from the MSSC maturity proceeds | Qualifies for deduction under section 80C of Income Tax Act only for 5-year POTD account |
| Tax Deducted at Source (TDS) | No TDS is deducted | No TDS is deducted |
| Premature Withdrawal | Allows withdrawal after 1 year with penalty of upto 2% | Allows withdrawal after 6 months with penalty of upto 2% |
| Others |
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Key characteristics of POMIS: Post Office Monthly Income Scheme is a good long-term investment alternative for investors who have lump sum amount to invest but are risk-averse. Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible for this scheme. In case of a joint account, it is mandatory that all the joint holders should have equal share in investment.
Speciality of POTD: Post Office Time Deposit offers four accounts with varying maturity dates. These are of maturity period of one year, two years, three years and five years & the account tenure can be extended by submitting a formal application to the concerned post office. Sole or joint (up to three adults) holding is allowed under POTD. POTD interest rates are reviewed every quarter.
Post Office Investment Options
| Serial Number | Investment Option | Rate of Interest (p.a.) |
|---|---|---|
| 1 | Post Office Savings Account | 4% payable annually |
| 2 | Post Office Recurring Deposit | 6.70% per annum compounded quarterly |
| 3 | Post Office Monthly Income Scheme (MIS) | 7.4% per annum payable monthly |
| 4 | Post Office Time Deposit (POTD) | 1yr:6.9%, 2yr:7.0%, 3yr:7.1% & 5yr:7.5% |
| 5 | Kisan Vikas Patra (KVP) | 7.5% compounded annually |
| 6 | Public Provident Fund (PPF) | 7.10% compounded annually |
| 7 | Sukanya Samriddhi Yojana (SSY) | 8.2% compounded annually |
| 8 | National Savings Certificate (NSC) | 7.70% compounded annually |
| 9 | Senior Citizen Savings Scheme (SCSS) | 8.20% payable quarterly |
| 10 | Mahila Samman Savings Certificate (MSSC) | 7.50% compounded quarterly |