How can you combine post office MIS with recurring deposit and maximise returns?

Post office Monthly Income Scheme (MIS), like other small savings schemes, is recognised and validated by the government. The interest in this case is disbursed monthly, which is guaranteed. Conservative investors who generally wish to get fixed monthly income choose this investment scheme.

Currently, the interest rate offered by Post Office MIS is 6.6 percent per annum and its maturity period is five years. The maximum investment limit for MIS is Rs 4.5 lakh in single account and Rs 9 lakh in joint account.

While the returns are fixed here, investors can maximize the overall return from MIS account by starting a recurring deposit (RD) using the monthly payouts from MIS account.

"The current rate of interest offered in MIS is payable monthly. However, if an investor lets the interest amount accumulate in the account, the same will not earn any additional interest. It means, on the investment amount of Rs 4.5 lakh, an investor will earn a total interest amount of Rs 1,48,500 in 5 years, which is monthly interest of Rs 2,475," says Pranjal Kamra, chief executive officer, Finology.

However, if the investor withdraws the monthly interest payout (that can be directed through auto credit into savings account) and invest it in RD, the returns can be increased.

The table shows the return on investment in the post office MIS, if an investor parks in Rs 4.5 lakh, according to Kamra:

Now, if the investor puts this monthly interest amount in a post office RD, the total interest income after five years will be Rs 1,72,500 (Rs 240,00 + Rs 1,48500). Currently, interest rate on post office recurring deposit is 5.8 percent and the maturity period is the same i.e 5 years.

Kamra explains the same with this table: