The Post Office Monthly Income Scheme (MIS) is a popular investment scheme in India.
This scheme is becoming very popular in India due to the facility of paying interest every month.
However, when it comes to taxation, people don't have the knowledge of whether the interest earned from a Post Office MIS account is taxable or not.
Today we will give you the right answer to the above question i.e. is post office MIS interest taxable?
Short Overview of Post Office MIS Scheme
The Post Office MIS is a National Small Savings Scheme of the Department of Post.
The scheme allows people to deposit a lump sum amount, which is then invested, and interest is paid out every month. The tenure of this scheme is five years, and it can be extended for another five years once the initial term ends.
Recently, the Government of India increased the maximum limit of deposit amount in Post Office MIS account. Nowadays. more people are investing their money in post office monthly Income Scheme
Visit the below link to learn more about Post Office MIS Scheme and its interest rate calculator.
Taxation on MIS Interest and Principal amount
No, the principal amount invested in a Post Office MIS account is not taxable.
The amount you deposit in the MIS account is your own money, and you won't be taxed on it when you withdraw it, regardless of the interest you earn.
The interest earned through a Post Office MIS account is taxable, but it's important to understand how it is taxed.
The interest income from MIS accounts is considered as "Income from Other Sources" under the Income Tax Act. Here's how the taxation works:
TDS (Tax Deducted at Source): Post offices are obligated to deduct TDS on the interest earned if it exceeds Rs. 10,000 in a financial year. The TDS rate is 10% of the interest income.
However, if your total income is below the taxable limit, you can submit Form 15H (for senior citizens) or Form 15G (for individuals below 60 years of age) to the post office, requesting them not to deduct TDS.
Add to Total Income: The interest earned from the Post Office MIS account should be added to your total income for the financial year when you file your income tax return.
Tax Slab Rate: The interest income will be taxed at your applicable income tax slab rate. It's essential to note that the interest income could potentially push you into a higher tax bracket, which will increase your tax liability.
Tax on Interest on Joint Accounts: If the Post Office MIS account is held jointly, the interest income will be divided equally among the account holders and taxed in their respective income slabs.
Is post office MIS interest taxable for Senior Citizens?
Yes, interest earned on MIS scheme by senior citizens is taxable.
However, senior citizens are eligible for certain tax benefits and deductions under Section 80TTB of the Income Tax Act.
According to Section 80TTB, senior citizens are eligible for a deduction of up to Rs. 50,000 on interest income earned from various sources, including savings accounts, fixed deposits, and post office MIS schemes.
Conclusion
In conclusion, the interest earned from a Post Office Monthly Income Scheme (MIS) is totally taxable. It is considered as income from other sources and is subject to TDS if it exceeds Rs. 10,000 in a financial year.
Additionally, it is taxed at your applicable income tax slab rate. However, the principal amount you invest in a Post Office MIS account is not taxable, making it a relatively tax-efficient investment option.
As tax laws are subject to change, it is advisable to consult a tax professional or refer to the latest tax regulations to ensure that you are aware of the most current taxation rules regarding your Post Office MIS interest income. Nevertheless, the Post Office MIS remains a popular investment choice for those seeking a regular source of income, despite the tax implications.
FAQs
Question 01- Is post office MIS scheme tax-free?
Answer- The principal amount deposited in Post Office MIS scheme is tax-free but interest earned on MIS scheme is taxable as per income tax rules and regulations.
Question 02- Is post office MIS interest taxable for senior citizens?
Answer- Yes.
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