National Savings Monthly Income Account

About the scheme
Earlier known as Post Office Monthly Income Scheme, this account accepts minimum investments of Rs 1000. The maximum you can invest is capped at Rs 4.5 lakh per individual account and Rs 9 lakh in a joint account. Like other small savings schemes, the interest rate offered is reset every quarter by the Government of India.

The interest is payable monthly. The scheme does not offer a quarterly or annual payout option. The interest from the scheme will be credited to your specified savings account held at the same post office. The scheme permits single, joint as well as minor accounts, with minors allowed to open and operate accounts from the age of 10.

The scheme has a 5-year term. It however allows premature exit after one year but before three years, with a penalty of 2 per cent on the deposit. After three years, the penalty is at 1 per cent of the deposit. Interest earned is taxable but qualifies for section 80TTB exemption upto Rs 50,000 a year for senior citizens alone. The sums you invest in this account are channelled into the National Small Savings Fund, which helps the Government of India meet its borrowing requirements every year. As these are Central government borrowings, they are sovereign-guaranteed. This actually makes National Savings Time Deposits safer than bank deposits, because banks offer deposit insurance cover only upto Rs 1 lakh per accountholder.

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