There are 10 to 11 different schemes available at the post office. And most people's main question is which scheme to put money in. The good news is that you don't need to understand all these schemes separately. If you want a regular, safe monthly income from your money, just two schemes are enough. And the best part is that there's a post office strategy that can give you up to ₹50,000 every month. And that too completely government-backed. We'll discuss this strategy in this post.
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| MIS And SCSS Schemes In Post Office |
Now look, in retirement the most important thing is that we get a fixed monthly income. This one criterion alone eliminates a lot of post office schemes right away, like PPF or the National Savings Certificate, which is called NSC. In these, the money gets locked up for years. There's no regular payout. It could be a time deposit or a recurring deposit. Their main role is to park money. Here they can't become a fixed income source for you. As for the Post Office Savings Account, if we talk about it, you get only a 4% interest rate there. Mostly we'd want to use it for emergencies. So when it comes to a regular income, along with good interest as well, two names come up. The first scheme is the MIS, which we call the Monthly Income Scheme, and the second is the SCSS, Senior Citizens Savings Scheme. Both these schemes are completely safe and also government-backed. We'll now talk about them in a bit of detail. But the question is also whether these schemes alone are enough for your entire retirement portfolio.
Monthly Income Scheme (MIS)
Let's first talk about the MIS, that is, the Monthly Income Scheme. In this, you can invest anytime at age 18 plus. In this, you deposit a lump sum amount once, and after that every month fixed interest keeps coming into your account for the full 5 years. That is, this is a 5- year block investment, so after 5 years you can renew it. You can't withdraw the principal amount. There are restrictions on it. In MIS, money can't be withdrawn at all for the first year, emergency or not. Between 1 year and 3 years, if you withdraw money, a 2% penalty applies. Between three and 5 years, if you withdraw money, 1% of your principal is charged as a penalty. As for interest, here we get 7.4% per annum interest as of today. It can also change from time to time. But if we generally compare it with a fixed deposit, it turns out to be a better interest rate. And this interest portion comes into your account every month as a form of income. If we talk about the investment limit here, a single account, meaning a single investor, can invest a maximum of only ₹9 lakh and in a joint account you can invest up to ₹15 lakh. As for tax, in MIS no TDS is deducted, but your entire interest is fully taxable. According to your income tax slab, you get taxed.
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Senior Citizens Savings Scheme (SCSS)
Now the next scheme is our SCSS, which we call the Senior Citizens Savings Scheme. The name itself shows that it is meant for senior citizens. That is, you can invest in it only when you are 60 plus. In terms of liquidity, SCSS has a little more flexibility. Even before 5 years are complete, the account can be closed or withdrawals can be made from it. But a penalty still applies. If you withdraw money within one year, in that case you won't get any interest, and if any interest has already been paid, it will be deducted from the principal amount and only then the principal will be returned to you. If you make a withdrawal between one and 2 years, a 1.5% penalty applies on the principal amount. Between 2 and 5 years, a 1% penalty applies. But here the interest is even better than MIS. Interest here is 8.2% per annum. As for payout, here we don't get a payout every month. It's quarterly, meaning once every 3 months you get a payout. The investment limit here is higher than MIS. ₹30 lakh per investor is the limit here. There's also a bit of a tax benefit here, under Section 80TTB, the interest rebate that we get is available to senior citizens up to ₹50,000 per annum. Under the new tax regime, there's no rebate on interest. But along with that, under our old tax regime, there's Section 80C, and this scheme of ours is also considered under it. So if you want to claim a tax deduction under it, you can. However, most people have now moved to the new tax regime. So that was a broad overview of both schemes.
How You Can Get Rs. 50,000 Per Month
Now the real question isn't which of these schemes is better. The real question is how these two can complement each other and how you can get a government-backed 8%-plus return. So here we don't have to choose. We can combine both of these to build a good retirement portfolio. So let's understand this once with a real example of how this portfolio can be constructed. Suppose a retired couple has a retirement corpus of around ₹80 lakh. In SCSS, the husband put ₹30 lakh in his name and the wife also put ₹30 lakh in her name. Total here is ₹60 lakh. In MIS, the husband can also put ₹9 lakh, and the wife can also put ₹9 lakh. So ₹18 lakh gets invested here. So a total of ₹78 lakh is comfortably invested. Now how much income will this generate? From SCSS, our Senior Citizen Savings Scheme, we'll roughly get ₹41,000 per month in interest, both combined, and this amount is the quarterly amount I've converted to monthly, so it comes to around ₹41,000. As for MIS, total combined here we get ₹11,100 per month in interest. So if we look at the couple's total income monthly, it can come to ₹52,100 here. On average, if we calculate the interest here, it comes to 8.1% per annum, combining both schemes. And in many cases, this total income doesn't go above ₹12.5 lakh, so under the new tax regime, in this case too, no tax will apply. So if this couple's overall income doesn't go above ₹12.5 lakh or ₹12,75,000, then no tax of any kind will apply under the new tax regime.
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Now there's one more thing to keep in mind so that no mistake happens. MIS has to be closed after 5 years and a new account opened. So that means the investment is for a 5-year block. That investment is happening. Then you can open a new account again for 5 years and start over. Whereas if we talk about SCSS, you don't need to open any new account. It can be extended for every 3 years, as many times as you like. So overall, it's a very good tool for retirement planning. But the main limitation of these schemes is that one person can invest a maximum of only ₹39 lakh, ₹30 lakh in SCSS and ₹9 lakh in MIS. So as we saw in the couple's case, at most ₹52,000 per month in income can be generated here. I'm sure a lot of people are thinking about retirement planning, and very few people know about these schemes. For retirement planning, they can be a good tool.
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