Post Office MIS Taxation Overview

In this post I will discuss post office mis taxation.

Post Office Monthly Income Scheme also known as POMIS or Post Office MIS, is a guaranteed monthly income product by government of India.

To know more about POMIS, please read this Review of Post Office Monthly Income Scheme.

In a post office MIS, a person deposits an amount with Post Office. Depending on the prevailing rate, he will receive monthly interest for 5 years (6 years for older schemes) and at the end of 5 years he will get back his invested amount.

For example, Ratan invests Rs. 150000 (1.5 lakhs) in POMIS. He gets a monthly income of Rs. 1050 or Rs. 12,600 per annum. After 5 years, he gets back his investment of Rs. 150000.

Post Office MIS is a safe product with regular income.

POMIS is suitable for the following type of people.

  • People who want regular guaranteed monthly income.
  • Retired people.
  • Senior citizens/ Aged people.
  • Risk averse people.

POMIS is useful for those who are looking for a long term regular source of income. However there are some aspects about post office mis taxation which I would like to discuss below.

Post Office MIS Taxation

1. Section 80C

Under Section 80C, a taxpayer can get tax benefits of upto Rs 1.5 lakhs by investing in specific products like National Savings Certificate (NSC), Public Provident Fund (PPF), Tax Saving Fixed Deposit.

There is no tax benefit under Section 80C for POMIS.

2. Interest Income in taxable

Monthly interest income received is taxable in the hand of investors dependiong on his tax slab.

For example, in the case of Ratan above, his monthly income is Rs 1050. His annual income is therefore Rs 12,600. Depending on his Income tax slab, he has to pay the following indicative tax on his income.

  • 10% slab – Rs 1260
  • 20% slab – Rs 2520
  • 30% slab – Rs 3780

3. Tax Deducted at Source

Tax Deducted at Source is not applicable to Post Office MIS.

Normally when you open a Fixed Deposit in a bank and your annual interest income is more than Rs 10,000 and you do not submit Form 15G or 15H, the bank will automatically deduct 10% tax and deposit it to the government. You have to pay any balance amount if applicable.

4. Wealth Tax

The amount deposited in POMIS is exempt from Wealth Tax.

These are some of the important post office mis taxation aspects that are useful to know before investing in them.

Conclusion

Post Office Monthly Income Scheme is therefore a very safe investment option with assured monthly returns.

Post Office Monthly Income Scheme tax benefits are not much, yet the convenience, safety and simplicity of the product is what makes it so popular.

To sum up, tax aspects of Post Office MIS are as below.

  1. There is no tax benefit under Section 80C.
  2. Interest income is taxable.
  3. There is no tax deducted at source (TDS).
  4. The amount deposited in Post Office Monthly Income Scheme is exempt from Wealth Tax.

For all these reasons, Post Office Monthly Income Scheme is very popular among senior citizens and retired people.

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Reference

A Few Last Words

Before making any investment decision, please contact your financial adviser. I have provided this article for educational purpose only.

I hope you found this article on post office mis taxation. If you have something to add please leave a comment in the post. Please feel free to contact me.

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

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