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MIS premature withdrawal rules, penalties explained

Several investors go for a Post Office Monthly Income Account (MIS) for regular income. If you have invested in MIS, you must know that you can withdraw money from it prematurely with penalties. However, you have to meet certain conditions for it. What are the rules for prematurely withdrawing money from the Post Office Monthly Income Account? What are the penalties you need to pay for closing MIS before maturity? ET Wealth Online explains

Post Office Monthly Income Accounts (MIS) premature withdrawal rules and penalty

According to the Post Office website, “No MIS shall be withdrawn before expiry of one year from the date of deposit.” Moreover an MIS account can be prematurely closed by submitting a prescribed application form with a passbook at the concerned Post Office.

There are certain penalties applicable for closing a Post Office Monthly Income Accounts. According to the India post office website as of March 15, 2024, given below are the penalties for closing down the MIS account:

(i) If the account is closed after 1 year and before 3 years from the date of account opening, a deduction equal to 2% from the principal will be deducted and the remaining amount will be paid.
(ii) If the account closes after 3 years and before 5 years from the date of account opening, a deduction equal to 1% from the principal will be deducted and the remaining amount will be paid.

Also read: Earn 7.4% interest on Post Office Monthly Income Scheme; do you get tax benefits for investing in POMIS?

When is interest paid for MIS?

For the January-March quarter of 2024, Post Office Monthly Income Account fetches an interest rate of 7.4% per annum, payable monthly. How do the investors get the interest of MIS? According to the India post office website as of March 15, 2024, “Interest shall be payable on completion of a month from the date of opening and so on till maturity. If the interest payable every month is not claimed by the account holder such interest shall not earn any additional interest. Interest can be drawn through auto credit into savings accounts standing at the same post office, or ECS. In the case of MIS accounts at CBS Post offices, monthly interest can be credited into savings accounts standing at any CBS Post Offices.”

The India post office website also mentions what will happen in case any excess deposit of more than the prescribed amount is made. “In case any excess deposit made by the depositor, the excess deposit will be refunded back and only PO Savings Account interest will be applicable from the date of opening of account to the date of refund,” said India post office on its website as of March 16, 2024.

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