Post Office Monthly Income Scheme interest rate review on September 30: Key points to know

The Post Office Monthly Income Scheme (MIS) is heading into the September 30 review after a long spell of no change. The scheme pays 7.4% per annum, a rate that has stayed the same since April 1, 2023, according to National Savings Institute (NSI) data. If Wednesday's notification for the October-December 2026 quarter leaves the scheme untouched, this would be its 14th consecutive quarter at 7.4%.

The Post Office MIS converts a lump sum into a fixed monthly payout for five years. A single account can hold between ₹1,000 and ₹9 lakh, and a joint account up to ₹15 lakh.

The interest on MIS deposits is paid out every month and is taxable at slab rate. The scheme does not qualify for Section 80C deduction. Further, premature closure is not allowed in the first year. It attracts a 2% deduction of the deposit between one and three years, and 1% after three years.

Under the Shyamala Gopinath Committee framework in force since 2016, the MIS is benchmarked to the 5-year G-sec with a 25-basis-point spread. In the July-September reference quarter, the 5-year G-sec averaged roughly 6.5%, implying a formula rate of about 6.75% against the 7.4% actually paid.

The September quarter ended with the steepest bond selloff of 2026. Government bonds’ prices have declined for six consecutive weeks. The benchmark 10-year G-sec yield touched about 7.1% on September 24-25, its highest in over four months, while the 5-year yield climbed to around 6.5-6.7%. Rising yields push the formula-implied rate up, reducing the chances of a MIS rate cut.

So far, the government has not passed formula-implied cuts to depositors for nine straight quarters. Small savings schemes like the MIS fund a meaningful part of government borrowing through the National Small Savings Fund (NSSF). A rate cut could slow these inflows. Therefore, one can expect a status quo, if not a hike.

A depositor aged 60 or above can earn 8.2% in the Senior Citizen Savings Scheme (SCSS) with quarterly payouts. On ₹9 lakh, that works out to ₹6,150 a month against the MIS's ₹5,550. Bank fixed deposit rates have also declined through 2025-26 after the RBI's four rate cuts in 2025, which leaves post office schemes with among the best guaranteed returns.

The monthly MIS payout is fixed at the time of opening the account. Any revision on Wednesday will apply only to fresh accounts. Retirees who want the current 7.4% can invest before October 1 to lock in the terms.