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Post Office Monthly Income Scheme (MIS) vs FD: Which Can Offer Higher Potential Returns?
The Department of Posts (DoP) offers 11 different schemes but the most popular ones are Post Office Monthly Income Scheme (MIS) and Post Office Time Deposit Account (TD) scheme. As these 2 schemes offer capital safety and guaranteed returns, however, the choice between Fixed Deposit (FD) and a Monthly Income Scheme (MIS) depends on your financial goals, risk appetite, and the type of returns you're looking for. For a better understanding, here's a comparison MIS vs Post Office FD and a conclusion on which can offer you higher potential returns.
| Features | Post Office Monthly Income Scheme Account (MIS) | Post Office Time Deposit Account (TD) |
|---|---|---|
| Contribution limit | In multiples of INR 1000/- up to INR 9 lakh in single account and INR 15 lakh in joint account | Minimum INR 1000/- and in multiple of 100. No maximum limit. |
| Interest rates | 7.4 % per annum payable monthly. | 1yr.A/c: 6.9%, 2yr.A/c: 7.0%, 3yr.A/c: 7.1%, 5yr.A/c: 7.5% |
| Interest payable | Interest shall be payable on completion of a month from the date of opening and so on till maturity. | Annually but calculated quarterly. |
| Tax benefit | Interest is taxable in the hand of depositor. | Qualifies for the benefit of section 80C of Income Tax Act, 1961 |
| Maturity: | Account may be closed on expiry of 5 years from the date of opening | 1 year, 2 year, 3 year, 5 year |
| Extension of Account | No | Yes |
| Premature closure of Account | Account can be prematurely closed after 1 year subject to penalty | Yes but after expiry of six months from the date of deposit. |
| Multiple account limit | Limit for account opened on behalf of a minor as guardian shall be separate. | Any number of account can be opened. |
| Who can open | a single adult, joint account (up to 3 adults), a guardian on behalf of minor, a guardian on behalf of person of unsound mind and a minor above 10 years in his own name. | a single adult, joint account (up to 3 adults), a guardian on behalf of minor, a guardian on behalf of person of unsound mind and a minor above 10 years in his own name. |
Monthly Income Scheme (MIS)
Here are the features, benefits and key takeaways of Post Office MIS Scheme as highlighted by Gaurav Goel (Entrepreneur, SEBI registered Investment Advisor).
Safety: MIS schemes like Monthly Income Mutual Funds, offer moderate to low risk. Such schemes (depending on the type) carry no market-related risks.
Payout: MIS offers regular, predictable monthly payouts, making it suitable for those who want a consistent income.
Liquidity: These are generally liquid, but premature withdrawal may carry exit loads.
Best for Investors seeking regular monthly income, such as retirees or those looking for steady cash flow.
Fixed Deposit (FD)
Here are the features, benefits and some key takeaways of fixed deposits as guided by Gaurav Goel.
Safety: FDs are considered very safe because they are backed by banks and financial institutions. They have minimal risk.
Returns: FDs offer guaranteed returns, typically ranging from 4% to 7% annually, depending on the bank, tenure, and prevailing interest rates.
Payout: FDs usually offer either a lump sum payout at maturity or periodic interest payouts (monthly, quarterly, etc.). However, the principal is locked until maturity.
Liquidity: FDs have limited liquidity. If you withdraw before the maturity date, you may incur penalties.
Tenure: FDs can have a tenure ranging from a few months to several years.
Taxation: Interest earned on FDs is taxable as per your income tax slab.
Best for: Conservative investors seeking safe, fixed, and guaranteed returns without much risk.
Conclusion
As per Gaurav Goel, choose FD if you want capital safety and guaranteed returns, and are okay with locking in the principal for a fixed period. Choose MIS if you want a regular monthly income, offering higher potential returns with moderate risk. For people seeking monthly income, MIS is usually more suitable.
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