Aakash and Suchita, both of them are financial planner in a leading Financial Planning firm and have a lovely family with a daughter Abhilasha. As both of them are working, so they hired a governess, Sita, for their little princess to take good care of her. Sita is a widow and also has a daughter who is 5 years old. Sita has recently received Rs 500000 as a claim from insurance company for the policy which her husband Manohar took on his name. 5 Lacs is a huge amount for Sita and she is confused as to what to do with this money. So she approached Suchita for the same.
Suchita as a responsible person, knows that it means a lot for her and she familiarised her about the recent government schemes for the girl child and asked her to deposit money in that to secure her daughter’s future. But Sita also made clear that she wants a risk free avenue for the investment so that her principal would be secure and a monthly income will be received so much so that the school fees for her daughter shall be met. So Suchita introduced a totally risk free investment scheme and that was Post Office Monthly Income Scheme.
This terminology sounded alien to Sita as she never took keen interest in the financial matter prior to this and whatever little money she has today is all because of Manohar. So Suchita explained her about the product. She explained that Post Office Monthly Income Scheme is introduced by Indian Post office, and it is totally meant for the investor just like Sita, who do not want to take any risk and wish to receive a guaranteed monthly return from their principal money while keeping their principal secured. This safety feature grabbed Sita’s attention and she enquired further about the product, other features, charges and formalities that are needed to be done to open this account. So Suchita did her job and explained to her.
Post Office Monthly Income Scheme is fixed income instrument which has been introduced by post office for the investors who are completely risk averse and want a fixed monthly income while keeping their principal secure. This scheme comes with a maturity period of 5 years and the current interest rate is 7.70% p.a. which is paid monthly to the account holder. The interest rate changes as per the guidelines of the government. This scheme does not have any tax benefit and interest income will be added to the taxable income of the account holder, as no TDS will be deducted on interest income paid to the holder.
Any individual who is a resident of India is eligible to avail the benefit of this account. This account has few additional benefits and they are;
- This account can be opened jointly by maximum 3 adults at a time.
- Minor after attaining 10 years of age is also eligible to open this account. However once he/she attain majority the account should be converted.
- Multiple accounts can be opened at a time in the post office.
- Accounts can be easily transferred from one post office to another.
- Nomination facility is available both at the time of opening as well as after the account has been opened.
The deposit in the account should be made in the multiple of Rs 1500. The minimum limit to open this account is Rs 1500 and the maximum amount is Rs 450000 for single account and Rs 900000 for the joint account. Maximum limit for minor is Rs 300000.
For example, if a person has a single as well as joint account in the post office under this scheme then, let’s say if he deposits Rs 150000 in his single account and Rs 300000 in his joint account then he cannot do any further deposit as he has reached his limit of Rs 450000. So the 900000 is an inclusive limit i.e. 450000 per person. Now the other holder of the account can deposit further Rs 450000 in the account.
You can deposit your money through cash or by cheque. If you are paying your amount through cheque then the account will be opened on the date at which the money is received by the post office. As soon as your account is opened, you will receive a certificate of your deposit as well as a passbook in which you can make your entries related to withdrawal as well as deposits made by you. This account is meant to provide assured monthly income to the investor.
So let’s say that like in our story, Sita deposits Rs 300000 in her account and the maturity period is 5 years at the rate of interest 7.70% p.a., then the monthly interest that she is entitled to receive is Rs 1925 and will get her Rs 300000 at the end of 5 years.
The investor get the facility that if he/she has a saving account and wants to receive the monthly payment in his/her account then an ECS form should be filled and your post office account will get connect with the saving account and the monthly interest will be credited directly in your savings account. The purpose of this scheme is to provide the liquidity to the investor, so it has lock in period of only 1 year. If need arises the facility of pre mature withdrawal is available from the end of first year subject to the following conditions;
- If withdrawal is made before the end of 3 years then, the penalty of 2% will be charged on your deposit and rest amount is paid.
- If withdrawal is made after 3 years then the penalty of 1% is to be borne by the holder.
It is to be noted that for the person who have opened their account prior to the year 1-12-2011 then, those individuals are entitled to receive 5% bonus on their principal at the time of maturity. However, this facility has been withdrawn and if the account has been opened after 1-12-2011 then no bonus will be available.
After getting the detailed knowledge about the product and impressed by the benefits that it provides Sita got eager to invest in the scheme. So she further enquired about the documents that are required at the time of opening the account and Suchita explained to her the procedure. The documents which are needed to open this account are
- Identity as well as Address Proof of the individual (Voter ID card, Aadhar Card, Passport etc.)
- Passport size photographs.
- In case of minor then Birth Certificate of the minor.
Sita thanked Suchita for all her time and effort that she had made to make her aware about the product. Suchita told her that it is her duty and responsibility and she helped her in opening her account. So if you too wish for such a guaranteed product then you can also avail this opportunity for your monthly financial needs.
