Your father has just retired with a lump sum, and the question at the dinner table is simple: where can this money sit safely and still pay something every month? For many Indian families the first answer is the Post Office Monthly Income Scheme, often called POMIS or simply MIS. You deposit once, and the post office pays you interest every month for five years. The second answer is usually the Post Office Time Deposit, the post office version of a bank fixed deposit.
This guide explains how both schemes work, how much you can put in, how the interest is paid, what happens if you need the money early, how the interest is taxed and how they compare with a bank FD. Rates and limits below come from India Post and the scheme notifications. Interest rates on small savings schemes are reset by the Ministry of Finance every quarter, so check the current rate before you invest.
What the Post Office Monthly Income Scheme is
MIS is a government savings scheme notified under the Government Savings Promotion Act, 1873. You make one deposit, the rate is fixed on the day you open the account, and interest is paid on completion of each month from the date of deposit. After five years you get your principal back.
Who can open an account:
- A single adult.
- Up to three adults jointly.
- A minor who is 10 or older, in his or her own name.
- A guardian on behalf of a minor or a person of unsound mind.
The minimum deposit is ₹1,000, and you can deposit in multiples of ₹1,000. Only one deposit is allowed per account, so if you want to add money later, you open another account. You can hold more than one MIS account, but all your MIS deposits together must stay within the maximum limit explained in the next section.
As of October 2026, India Post lists the MIS rate at 7.4% a year, payable monthly. That rate stays the same for your account for the full five years even if the government changes rates for new depositors in later quarters.
Deposit limits and how much monthly income you get
The maximum is ₹9 lakh in a single account and ₹15 lakh in a joint account. These limits were raised from ₹4.5 lakh and ₹9 lakh in 2023. In a joint account, each holder is treated as having an equal share, and your share of joint deposits counts towards your own overall limit.
Here is what the monthly payout looks like at the current 7.4% rate. These are simple illustrations; your actual credit depends on the rate on your account opening date.
| Deposit | Monthly interest at 7.4% | Interest over 5 years |
|---|---|---|
| ₹1 lakh | ₹617 | about ₹37,000 |
| ₹5 lakh | ₹3,083 | about ₹1.85 lakh |
| ₹9 lakh (single maximum) | ₹5,550 | ₹3.33 lakh |
| ₹15 lakh (joint maximum) | ₹9,250 | ₹5.55 lakh |
One rule people miss: monthly interest that you leave unclaimed does not earn any extra interest. If the money just piles up, it is losing value. Most savers have the interest moved to a savings account, or they use it to fund a recurring deposit so that it keeps working. You can see how a monthly ₹5,550 grows in an RD with our RD calculator.
If you deposit more than the limit by mistake, the excess is refunded, and it earns only the post office savings account rate (currently 4% a year) until the refund.
Premature closure of an MIS account
The Post Office Monthly Income Scheme is meant to be held for five years, but life does not always cooperate. The scheme allows you to close the account early, with a deduction from your principal:
- Before one year: no withdrawal at all.
- After one year, up to three years: 2% of the deposit is deducted.
- After three years, before five years: 1% of the deposit is deducted.
As an illustration, say you closed a ₹9 lakh account after two years. The post office would deduct ₹18,000 and pay you ₹8.82 lakh. Close it after three and a half years and the deduction falls to ₹9,000. The monthly interest you already received is not taken back, but the hit to principal can wipe out several months of income, so keep a separate emergency fund instead of planning to break the MIS.
If the account holder dies before maturity, the account can be closed and the deposit refunded to the nominee or legal heirs, with interest up to the month before the refund. Adding a nominee when you open the account saves your family a lot of paperwork later.
Post Office Time Deposit: the post office FD
The National Savings Time Deposit, usually called Post Office TD, works like a bank fixed deposit. You choose a tenure of one, two, three or five years. The same people who can open an MIS can open a TD: a single adult, up to three adults jointly, a minor aged 10 or above, or a guardian.
Deposit and interest
The minimum deposit is ₹1,000, and after that any amount in multiples of ₹100. The scheme sets no upper limit, and you can open more than one account. India Post currently shows TD rates of 6.9% to 7.5% depending on tenure, with the five-year TD at the top of that range.
Interest is compounded quarterly but paid out once a year, on each anniversary of the account. As an illustration, ₹1 lakh in a five-year TD at 7.5% earns about ₹7,714 a year. Like MIS, interest that falls due and is not withdrawn earns nothing extra, but you can ask for the annual interest to be credited to your post office savings account.
Extension at maturity
You can extend a TD for the same tenure you first chose. The request window is six months after maturity for a one-year TD, twelve months for a two-year TD and eighteen months for three-year and five-year TDs. The extended deposit earns the rate in force on the maturity date, and you can extend only twice after the first maturity. You can also give the extension instruction when you open the account.
Premature closure rules for a Post Office TD
No TD can be closed in the first six months. After that the rules depend on the tenure and on when the account was opened:
- One-, two- and three-year TDs closed after six months but before one year: you get only the post office savings account rate for the completed months.
- Two-year and three-year TDs closed after one year: interest is recalculated at two percentage points below the rate for a deposit of the completed number of years, and any extra interest already paid is recovered from what you receive.
- Five-year TDs opened under the current rules: after a 2023 amendment, a five-year TD can be closed early only after four years, and then it earns only the post office savings account rate. Older five-year accounts follow the earlier rules, so ask the post office which set applies to yours.
The lesson is clear: a five-year TD is close to a locked deposit. Use it only for money you are sure you will not need for at least four years.
How the interest is taxed
Interest from MIS and TD is fully taxable. It is added to your income and taxed at your slab rate in the year it is paid to you or credited, so a senior citizen in a low slab keeps most of it while someone in the 30% slab keeps far less. There is no special exemption for MIS interest.
Tax deducted at source applies to interest paid by banks, co-operative banks and the post office once it crosses a yearly threshold. The threshold is ₹1 lakh for senior citizens and ₹50,000 for others, following the limits set in the Union Budget 2025-26. If your total income is below the taxable limit, you can give the payer a declaration (Form 121 under the Income-tax Rules, 2026, which replaced Forms 15G and 15H) so that tax is not deducted.
The five-year TD has one extra benefit. Under the old tax regime, deposits in a five-year post office TD qualify for the deduction that used to be section 80C and is now section 123 of the Income-tax Act, 2025 as published by the Income Tax Department, within the overall limit of ₹1.5 lakh a year. The interest is still taxable. If you are on the new tax regime, which is now the default, this deduction is not available. You can compare both regimes with our income tax calculator.
Post Office Monthly Income Scheme vs Time Deposit vs bank FD
All three are low-risk, fixed-return choices. The differences are in safety cover, payout style and flexibility.
| Feature | Post Office MIS | Post Office TD | Bank FD |
|---|---|---|---|
| Backing | Government savings scheme | Government savings scheme | DICGC insurance up to ₹5 lakh per depositor per bank |
| Tenure | 5 years | 1, 2, 3 or 5 years | From 7 days, as the bank offers |
| Interest payout | Monthly | Yearly | Monthly, quarterly or at maturity |
| Maximum deposit | ₹9 lakh single, ₹15 lakh joint | No limit | No limit |
| Early exit | After 1 year, 1% to 2% of principal deducted | After 6 months, reduced interest | Allowed for individual deposits up to ₹1 crore, penalty as per bank policy |
| Rate | Set quarterly by government | Set quarterly by government | Set by each bank |
On safety, post office schemes are sovereign schemes run by the government. A bank FD is covered by DICGC deposit insurance only up to ₹5 lakh per depositor in each bank, counting principal and interest together. If you plan to keep more than that in one bank, the post office route, or spreading deposits across banks, gives more protection.
On returns, compare the current MIS and TD rates with what banks are offering at the time. RBI rules let banks offer resident senior citizens a higher rate, which can close the gap. Use our FD calculator to put the numbers side by side.
Who should use which scheme
The Post Office Monthly Income Scheme suits retirees and anyone who wants a predictable cheque every month, such as a parent covering household bills or a family paying school fees. Couples can open a joint account to go up to ₹15 lakh. Retirees who meet its age rules may also look at the Senior Citizens Savings Scheme, which India Post lists at a higher rate, and use MIS for money beyond that.
The TD suits people who do not need monthly income and want to lock in today’s rate for a fixed period. A five-year TD makes sense mainly for old-regime taxpayers who want the deduction and can lock the money away. A one-year or two-year TD works as a parking place for money you will need on a known date, such as a down payment.
Neither scheme beats inflation by much after tax, especially in higher slabs. Treat them as the stable part of your savings, not the only part.
Key takeaways
- MIS pays monthly interest for five years; the current rate shown by India Post is 7.4% a year.
- Limits are ₹9 lakh single and ₹15 lakh joint, with a minimum of ₹1,000.
- MIS cannot be closed in the first year; after that 2% (up to 3 years) or 1% of the deposit is deducted.
- TD offers 1, 2, 3 or 5 years, interest paid yearly; a new five-year TD can be closed early only after four years.
- Interest on both is taxable at your slab; only the five-year TD gives a deduction, and only under the old regime.
- Check the rate for the current quarter at the post office or on India Post’s website before you invest.
This guide is general information, not personal advice. Rates and rules can change, so confirm the details at your post office before you sign the form.
