National Savings Monthly Income Account

Updated on: Jan 13th, 2022 - 3:52:46 AM

5 min read

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National Savings Monthly Income Scheme is an excellent investment option for pensioners and those looking for a regular inflow of funds. 

Latest Update

Latest update:
The CBDT notifies Form 12BBA, a declaration form, to be submitted by the eligible senior citizens to the specified banks to take relief from filing the ITR.

In Budget 2021, it has been proposed to exempt senior citizens from filing income tax returns if pension income and interest income are their only annual income sources. Section 194P has been newly inserted to enforce that banks deduct tax on senior citizens of more than 75 years of age who have a pension and interest income from the bank.

What is National Savings Monthly Income Scheme?

The Central Government of India on 12 December 2019 announced National Savings Monthly Income Scheme through notification GSR 917 (E). The scheme was introduced as per section 3A of the Government Savings Promotion Act, 1873 (5 of 1873). The National Savings Monthly Income Scheme is open to all resident Indian citizens, including minors.

This scheme is an excellent investment option for retired individuals and those looking to earn a regular interest income. Under this scheme, an account can hold a maximum of Rs 4,50,000 at any point. Individuals are allowed to open more than one account. However, the total funds in all the accounts shall not exceed Rs 4,50,000. A joint account can have a maximum of Rs 9 lakh at any point. These accounts come with a lock-in period of five years.

Types of Accounts

The following accounts are permitted under the National Savings Monthly Income Account:

  • Individual account being operated by an adult with a limit of Rs 4.5 lakh
  • A joint account managed by a maximum of three adults, with a limit of Rs 9 lakh
  • Minor accounts being operated by the legal guardian

One may open and handle more than one account, but a person cannot have more than the said limit with their investment spread across all the accounts that they own.

Features of National Savings Monthly Income Scheme

The following are some of the salient features of the National Savings Monthly Income Scheme:

  • The accounts under the National Savings Monthly Income Scheme provide a fixed rate of interest, regardless of the market scenario
  • The current interest rate on these accounts is 6.6% p.a.
  • The lock-in period of these accounts is only five years
  • One can invest as low as Rs 100 in a deposit
  • Premature closure of accounts is permitted with a penalty

Interest Rate

As mentioned earlier, the current interest rate on the accounts held under the National Savings Monthly Income Scheme is 6.6% p.a. It would be revised as per the decision made by the government and the Central Bank depending on several economic factors. However, rest assured that these accounts provide much higher interest than a regular savings account.

Investing Rs 9 lakh in a joint account at the time of opening will provide Rs 4,950 per month (considering the interest remains at 6.6% p.a.). The total income earned in the form of monthly interest would amount to Rs 2,97,000 (Rs 4,950*12*5) at the end of five years. Likewise, investing Rs 4 lakh in an individual account would provide a monthly interest of Rs 2,200. It would amount to Rs 1,32,000 at the end of five years.

The National Savings Monthly Income Scheme is an excellent investment option for those looking to earn regular monthly income. It is ideal for pensioners and those risk-averse investors who have a substantial amount in their disposal.

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