Post Office MIS at 7.4%: How ₹9 Lakh Pays ₹5,550 Monthly

Retirement isn't the problem. The problem is the day your salary stops arriving on the 1st of every month, but your electricity bill, your grocery bag, your grandchild's birthday gift and your medicine strip all keep showing up on schedule. For most Indian retirees sitting on a ₹5–15 lakh corpus, the real anxiety isn't "how much did I save" — it's "will that money actually pay me a dependable amount, month after month, without me having to touch the risky share market?"

Here's a number that surprises a lot of my clients: a ₹9 lakh deposit in the Post Office Monthly Income Scheme, at the current 7.4% annual rate, hands you roughly ₹5,550 in your bank account every single month — sovereign-backed, fixed for five years, no equity risk, no NAV to watch. That's the closest thing India offers to a government-guaranteed monthly pension for ordinary savers.

In this article I'll walk you through exactly how the post office monthly income scheme 2026 works, show you the month-by-month math on ₹9 lakh (and ₹4.5 lakh, and ₹15 lakh), compare it honestly against FDs and other options, tell you how it's taxed, and give you the step-by-step account-opening checklist. No jargon, no sales pitch. Just what I'd tell my own parents.

Key Takeaways

• Post Office MIS currently pays 7.4% per annum, credited monthly — rates are reviewed by the government every quarter.
• A ₹9 lakh single-account deposit yields ₹5,550/month (₹9,00,000 × 7.4% ÷ 12). A joint account can hold up to ₹15 lakh, paying ₹9,250/month.
• The scheme has a 5-year lock-in. Premature exit is allowed after 1 year but with a penalty.
• Interest is fully taxable as "income from other sources" — there is no TDS deducted, and no Section 80C benefit on the deposit.
• Your principal is fully returned at maturity — MIS pays income only, it does not grow your capital.
• Best used as one leg of a laddered, diversified income plan, not your entire retirement corpus.

What is the Post Office Monthly Income Scheme and how does it pay you?

The Post Office Monthly Income Scheme (POMIS) is a small-savings scheme run by India Post on behalf of the Government of India. You deposit a lump sum once, and the post office pays you a fixed rate of interest — currently 7.4% per year — split into 12 equal monthly instalments. At the end of the 5-year term, your original deposit is returned to you in full.

The key word is monthly. Unlike a bank FD where interest usually compounds and pays out on maturity (or quarterly at best), MIS is designed from the ground up to generate a predictable cash flow. That makes it a natural fit for retirees, homemakers with a windfall, or anyone who wants a portion of their savings working like a salary.

Deposit limits matter here:

• Single account: maximum ₹9 lakh
• Joint account (up to 3 adults): maximum ₹15 lakh
• Minimum deposit: ₹1,000, in multiples of ₹1,000

The interest is credited to your linked post office savings account or your bank account. It does not compound inside MIS — you receive it and spend it (or reinvest it elsewhere, which I'll come to).

How does ₹9 lakh become ₹5,550 every month? The exact math

Let me show you the calculation transparently, because too many articles just quote the headline figure without proving it.

The monthly interest formula is simply:

Monthly income = (Principal × Annual rate) ÷ 12

Take Kamala ji, a 62-year-old retired schoolteacher from Pune. She receives ₹9 lakh from her PPF maturity and wants steady monthly income without touching equities. She opens a single POMIS account with the full ₹9 lakh.

• Annual interest = ₹9,00,000 × 7.4% = ₹66,600
• Monthly income = ₹66,600 ÷ 12 = ₹5,550
• Over 5 years, total interest = ₹66,600 × 5 = ₹3,33,000
• At maturity she gets back her ₹9,00,000 principal, fully intact

So across five years, Kamala ji collects ₹3.33 lakh in income and still walks away with her original ₹9 lakh. That ₹5,550 lands in her account every month like clockwork, government-guaranteed.

Now let's scale it. Because the math is linear, you can size your deposit to your target income:

Deposit	Account type	Annual interest (7.4%)	Monthly income	Total income over 5 yrs
₹4,50,000	Single	₹33,300	₹2,775	₹1,66,500
₹9,00,000	Single (max)	₹66,600	₹5,550	₹3,33,000
₹12,00,000	Joint	₹88,800	₹7,400	₹4,44,000
₹15,00,000	Joint (max)	₹1,11,000	₹9,250	₹5,55,000

Want to try your own deposit figure — say ₹6.5 lakh or ₹11 lakh? Since it's a straightforward interest calculation, you can model it in seconds with our Simple Interest Calculator or double-check the yearly figure against our FD Calculator.

Post Office MIS vs FD vs SCSS: which gives retirees better monthly income?

MIS is not the only game in town. If you're a retiree, three instruments genuinely compete for your money: POMIS, a bank/post-office FD, and the Senior Citizens' Savings Scheme (SCSS). Here's how they stack up for someone who wants monthly cash flow and capital safety.

Feature	Post Office MIS	Bank FD (senior)	SCSS
Indicative rate	7.4% p.a.	~6.5–7.5% p.a.	8.2% p.a.
Payout frequency	Monthly	Monthly/Qtrly (optional)	Quarterly
Max deposit	₹9L single / ₹15L joint	No hard limit	₹30 lakh
Lock-in / tenure	5 years	Flexible (7 days–10 yrs)	5 years (extendable)
Section 80C benefit	No	Only 5-yr tax-saver FD	Yes, on deposit
Safety	Sovereign (highest)	Insured up to ₹5L (DICGC)	Sovereign (highest)
Eligibility	Any resident adult	Anyone	60+ (or 55+ on VRS)

My honest read: if you are 60 or above, SCSS should be your first choice for the higher 8.2% rate and the ₹30 lakh limit — and it even offers an 80C deduction. Use POMIS as the second leg once you've filled your SCSS quota, especially because MIS pays monthly (SCSS pays quarterly) and MIS is open to under-60 savers who don't qualify for SCSS. FDs are best used for laddering flexibility and any amounts beyond the small-savings caps.

Pro tip: Don't dump everything into one instrument. A retiree with ₹40 lakh might put ₹30L in SCSS, ₹9L in POMIS (single account) and keep the rest in a laddered FD for liquidity. That spreads your rate-reset risk and gives you a mix of monthly and quarterly income streams.

How is Post Office MIS interest taxed in FY 2025-26?

This is where I see retirees get caught off guard, so read carefully.

The interest you earn from POMIS is fully taxable under the head "Income from Other Sources" and is added to your total income, taxed at your applicable slab rate. There are two important nuances:

• No TDS is deducted by the post office on MIS interest. That does not mean it's tax-free — it means the onus is entirely on you to declare it in your ITR and pay tax if applicable.
• No 80C deduction is available on the amount you deposit into MIS (unlike PPF, SCSS or ELSS).

Let's make it concrete. Kamala ji's ₹66,600 annual MIS interest is her only taxable income besides a small pension. Under the new tax regime for FY 2025-26, income up to ₹12 lakh effectively pays no tax after the Section 87A rebate, so she owes nothing. But a retiree with a large pension already in the 20–30% bracket would pay tax on this ₹66,600 at their slab.

Senior citizens should also remember Section 80TTB, which allows a deduction of up to ₹50,000 on interest income from deposits — but note this applies to bank/post-office savings and FD interest under the old regime; the treatment of scheme interest can vary, so confirm with your CA. Model your total tax with our Income Tax Calculator before deciding how much to park in taxable instruments.

Common mistake: Assuming "no TDS" means "no tax." Every year the Income Tax Department cross-checks your Annual Information Statement (AIS). Undeclared MIS interest can trigger a notice. Always report it — the tax may still be zero if you're below the exemption limit, but the reporting is non-negotiable.

How to open a Post Office MIS account: step-by-step

Opening a POMIS account is genuinely simple and can be done at any post office. Here's the exact walkthrough:

1. Open a Post Office Savings Account first (if you don't have one). MIS interest is credited here, or you can link your bank account for auto-credit.
2. Collect the account opening form from the post office counter, or download it from the India Post website.
3. Attach KYC documents: Aadhaar, PAN (mandatory), one passport-size photo, and address proof.
4. Decide single vs joint. If you want the ₹15 lakh limit or want a spouse as co-holder, open a joint account. Nominate a beneficiary — this step is critical and people skip it.
5. Deposit the amount by cheque or transfer. The date the cheque clears is your account opening date, from which the 5-year term counts.
6. Set up interest credit. Choose auto-credit to your linked savings/bank account so you never have to visit the branch to collect income.
7. Collect and safeguard your passbook. This is your proof of investment and shows every monthly credit.

The whole process takes under an hour at most branches. Keep a photocopy of everything and note your maturity date in your phone calendar.

What happens if you need the money before 5 years?

MIS allows premature withdrawal, but with conditions and a penalty on the principal:

• Before 1 year: No withdrawal allowed. Your money is locked.
• Between 1 and 3 years: A 2% deduction from the principal is applied on exit.
• Between 3 and 5 years: A 1% deduction from the principal is applied.

So if Kamala ji needs her ₹9 lakh after 2.5 years, she'd forfeit 2% (₹18,000) and receive ₹8,82,000, having already collected her monthly income up to that point. It's not catastrophic, but it does reward you for staying the full term. This is why POMIS should hold money you genuinely won't need for five years — keep an emergency fund separately in a liquid FD or savings account.

Smart ways to use your monthly MIS income

Getting ₹5,550 a month is nice — but here's a strategy the sharpest savers use. If you don't need to spend the full monthly interest, redirect it into a growth instrument so your money keeps compounding even while your principal sits safely.

The MIS + RD combo

Historically, the post office even ran an auto-sweep of MIS interest into a Recurring Deposit. You can replicate this manually: route your ₹5,550 monthly MIS payout into a recurring deposit or a monthly SIP in a conservative fund. Over 5 years, that turns idle interest into an additional lump sum.

For example, ₹5,550/month invested in an RD at ~6.7% for 5 years grows to roughly ₹3.9 lakh — on top of your untouched ₹9 lakh principal. Model exact figures in our SIP Calculator if you'd prefer an equity route for that surplus.

Ladder it against inflation

A fixed 7.4% feels great today, but at 5–6% inflation your ₹5,550 buys less each year. Run your numbers through our Inflation Calculator to see the real purchasing power, and consider keeping part of your corpus in growth assets. If you're comfortable with a little market exposure, our piece on Nifty 50 index funds vs active funds is worth a read.

Where POMIS fits in a complete retirement income plan

I never recommend the post office monthly income scheme as someone's entire retirement strategy. It's excellent for the "safe, predictable income" bucket, but it doesn't beat inflation over the long run and it caps out at ₹15 lakh. A well-built plan layers several instruments:

• SCSS for the highest guaranteed rate (₹30 lakh limit if 60+).
• POMIS for monthly cash flow up to ₹9L/₹15L.
• NPS or a systematic withdrawal plan for a growth-linked pension — see our guide on NPS systematic withdrawal to draw ₹50,000 monthly at 60.
• PPF for a tax-free long-horizon corpus — the math in how ₹1.5L a year becomes ₹40 lakh is eye-opening.
• Equity index funds for the portion that must outpace inflation over 10+ years.

If you're saving for a daughter's future rather than your own retirement, the Sukanya Samriddhi Yojana at 8.2% beats MIS handily for that specific goal. And if gold forms part of your safe-haven allocation, our note on the SGB dip is timely reading.

Frequently asked questions

What is the current Post Office MIS interest rate in 2026?

The Post Office MIS rate is currently 7.4% per annum, paid monthly. Small-savings rates are reviewed by the Government of India every quarter, so always confirm the prevailing rate at the post office before you invest, as it can be revised each January, April, July and October.

How much monthly income does ₹9 lakh give in Post Office MIS?

At 7.4%, a ₹9 lakh single-account deposit gives ₹66,600 per year, which works out to ₹5,550 credited every month. Your full ₹9 lakh principal is returned at the end of the 5-year term.

Is Post Office MIS interest tax-free?

No. MIS interest is fully taxable as "income from other sources" at your slab rate. There is no TDS deducted, but you must declare the interest in your ITR. There is also no Section 80C deduction on the deposit amount.

Can I invest ₹15 lakh in Post Office MIS?

Yes, but only through a joint account held by up to three adults — that carries a ₹15 lakh limit and pays ₹9,250 per month at 7.4%. A single account is capped at ₹9 lakh.

Can I withdraw my money before 5 years?

Withdrawal is not allowed in the first year. Between 1 and 3 years there is a 2% penalty on the principal, and between 3 and 5 years the penalty drops to 1%. You continue receiving monthly interest until you exit.

Is SCSS better than POMIS for senior citizens?

For most seniors, yes — SCSS offers a higher 8.2% rate, a larger ₹30 lakh limit and an 80C benefit. However, SCSS pays quarterly while POMIS pays monthly, and POMIS is open to those under 60, so many retirees use both to build a layered income plan.

Where can I calculate my exact returns?

You can model the interest with our Simple Interest Calculator, compare it against fixed deposits using the FD Calculator, and check the full suite of free financial calculators to plan your retirement income across instruments.

The bottom line

The post office monthly income scheme 2026 does exactly one job, and it does it reliably: it converts a lump sum into a fixed, government-backed monthly income for five years. A ₹9 lakh deposit at 7.4% pays ₹5,550 a month and returns your capital untouched at maturity — no market swings, no NAV anxiety, no drama.

But treat it as one instrument in a larger orchestra, not the whole band. Fill your SCSS quota first if you're eligible, use POMIS for monthly cash flow, keep an emergency fund liquid, and put your long-horizon money somewhere that outpaces inflation. Report the interest honestly, note your maturity date, and reinvest whatever income you don't need.

Run your own numbers before you commit a single rupee — plug your target monthly income into our FD Calculator and Income Tax Calculator, and explore the rest of our free planning tools. If you'd like to know more about how we build these guides, visit our about page or get in touch. Your future self — the one collecting income on the 1st of every month — will thank you.

Image credit: President Cyril Ramaphosa addresses Team SA ahead of Investment Conference — GovernmentZA, via flickr (BY-ND 2.0), sourced from Openverse.