Post Office Monthly Income Scheme: Rs 9 lakh deposit earns Rs 5,550 interest a month

The Post Office Monthly Income Scheme is meant for people who have savings and want a assured monthly income without risk. The money stays safe and income arrives every month.

The scheme requires a lump-sum deposit, after which a fixed interest amount is credited to the account every month. The term is five years, and on completion the entire deposited amount is returned. The scheme currently pays interest of 7.4 per cent a year.

Take an example in which a person invests Rs 9 lakh. The calculation works out as follows: total investment, Rs 9,00,000; annual interest rate, 7.4 per cent; monthly interest, Rs 5,550; interest in one year, Rs 66,600; total interest over five years, Rs 3,33,000; amount returned at maturity after five years, the entire principal of Rs 9,00,000.

An investor of Rs 9 lakh thus earns Rs 3,33,000 in interest over five years, and the principal comes back intact.

Many people ask whether money can be withdrawn before maturity. It can. If funds are needed suddenly, the amount can be withdrawn before the five-year term ends. However, money can be withdrawn only after at least one year has passed since the account was opened. A penalty may also be charged if the account is closed before maturity.

The scheme is described as suitable for those who wish to avoid the risk of the share market or mutual funds, and for those who want to protect their hard-earned money while meeting a fixed monthly expense. It can be especially useful for senior citizens after retirement, who need money every month for household expenses.