Social media claims Post Office MIS + RD gives 8.8% returns. Is it true? Find the real post-tax XIRR and bust the myth of so-called experts.
Every few months, new videos and social media posts claim to have “discovered” a smart trick to earn higher returns from Post Office schemes. One such viral idea doing the rounds is —
“Invest in the Post Office Monthly Income Scheme (MIS) and reinvest the monthly interest in a Recurring Deposit (RD) — you’ll get 8.8% returns!”
A government-backed, risk-free 8.8% return sounds too good to ignore. But as I always say, in personal finance, if something sounds too good to be true, it usually is.
So, let’s break down this claim using the actual Post Office interest rates for Oct–Dec 2025, understand how MIS and RD work, and calculate the real return (XIRR) for different tax situations — including zero tax.
Post Office MIS + RD Returns: Can You Really Earn 8.8%?
Understanding the Basics: What Are MIS and RD?
Before calculating returns, we need to understand how each of these schemes functions.
Post Office Monthly Income Scheme (MIS)
- You invest a lump sum amount (say Rs.9,00,000).
- The government pays you monthly interest for 5 years.
- Current interest rate (Oct–Dec 2025): 7.4% per annum (as per Basunivesh.com Post Office Interest Rates Update).
- You receive Rs.9,00,000 × 7.4% ÷ 12 = Rs.5,550 per month as interest.
- After 5 years, your Rs.9,00,000 principal is returned in full.
So, MIS is basically an income-generating scheme. It doesn’t reinvest the interest — you have to manually use or reinvest that monthly income.
Post Office Recurring Deposit (RD)
- In RD, you invest a fixed amount every month for 5 years.
- It earns 6.7% annual interest, compounded quarterly (not monthly).
- At the end of 5 years, you receive your total deposits + accumulated interest.
RD is ideal for those who want to build savings gradually. Now, in this “viral combo strategy,” the MIS monthly interest is being redirected into an RD every month.
The Viral Claim — “Earn 8.8% Return!”
Here’s the story many videos and posts tell:
- Invest Rs.9,00,000 in MIS.
- Receive Rs.5,550 per month as interest.
- Deposit Rs.5,550 every month into a 5-year RD (earning 6.7%).
- After 5 years, get Rs.9 lakh (MIS maturity) + Rs.3.9 lakh (RD maturity).
- Total maturity = Rs.12.9 lakh.
- Hence, 8.8% return!
At first glance, it looks perfectly logical. But when you dig deeper, you’ll realize it’s mathematically flawed. Let’s see why.
Why This Calculation is Wrong
- It Ignores Taxes
Both MIS and RD interest are fully taxable under “Income from Other Sources.”
If you fall in a 20% or 30% tax slab, your effective return falls sharply.
Even if you are in the 0% tax bracket, remember that no Post Office scheme (other than PPF or Sukanya Samriddhi) gives tax-free interest.
- It Assumes Monthly Compounding for RD
This is the most common mistake in viral calculations.
Post Office RD compounds quarterly, not monthly.
That means every three months, the interest is added to the balance — not every month. Hence, the maturity amount will be lower than what these viral posts claim.
- It Uses Simple Averages Instead of XIRR
When you invest at different times (like every month into an RD), you cannot just add up total returns and divide by the number of years.
The correct way to find the true annualized return is by using the XIRR (Extended Internal Rate of Return) method, which accounts for the timing of every cash inflow and outflow.
Let’s Calculate the Real Return (Using Actual Rates)
Let’s assume you invest Rs.9,00,000 in MIS at 7.4%, and the monthly interest is invested in a 5-year RD at 6.7% (quarterly compounding).
We’ll calculate for four tax scenarios:
- Zero tax liability
- 5% slab
- 20% slab
- 30% slab
Common Assumptions
- MIS Interest Rate: 7.4%
- RD Interest Rate: 6.7% (quarterly compounding)
- Duration: 5 years (60 months)
- Initial Investment: Rs.9,00,000
- RD started each month with post-tax MIS interest.
Case 1: Zero Tax Liability
You receive the full Rs.5,550/month from MIS and reinvest it in RD.
RD Maturity Calculation (6.7% compounded quarterly):
After 60 monthly deposits of Rs.5,550, your RD matures at approximately Rs.3.96 lakh.
At the end of 5 years, you also get back Rs.9,00,000 from MIS.
Total Maturity = Rs.9,00,000 + Rs.3,96,000 = Rs.12,96,000
When we calculate the XIRR, it works out to around 7.4% per annum.
So, for someone who pays zero tax, this combo roughly equals the MIS rate itself. There’s no “extra magic” happening here — the 8.8% claim is simply wrong.
Case 2: 5% Tax Slab
Tax reduces your monthly reinvestment to Rs.5,272 (Rs.5,550 – 5%).
Your RD matures at approximately Rs.3.76 lakh, and you get back Rs.9 lakh from MIS.
Total Maturity = Rs.12,76,000
XIRR = ~7.1% per annum
Case 3: 20% Tax Slab
After 20% tax, your reinvestment falls to Rs.4,440/month.
Your RD matures at approximately Rs.3.12 lakh, and MIS principal of Rs.9 lakh is returned.
Total Maturity = Rs.12,12,000
XIRR = ~6.2% per annum
Case 4: 30% Tax Slab
After 30% tax, you can reinvest only Rs.3,885/month.
Your RD matures at approximately Rs.2.72 lakh, plus Rs.9 lakh MIS principal.
Total Maturity = Rs.11,72,000
XIRR = ~5.2% per annum
Summary Table: Realistic Returns from MIS + RD Combo
| Tax Slab | Monthly RD Investment | RD Maturity (5 yrs @6.7%) | Total Maturity (MIS+RD) | Realistic XIRR |
| 0% | Rs.5,550 | Rs.3.96 lakh | Rs.12.96 lakh | 7.4% |
| 5% | Rs.5,272 | Rs.3.76 lakh | Rs.12.76 lakh | 7.1% |
| 20% | Rs.4,440 | Rs.3.12 lakh | Rs.12.12 lakh | 6.2% |
| 30% | Rs.3,885 | Rs.2.72 lakh | Rs.11.72 lakh | 5.2% |
The Truth: There Is No 8.8% Return Here
The 8.8% return figure being circulated online is completely wrong.
It ignores tax, assumes incorrect compounding, and uses an unrealistic calculation method.
Here’s what’s real:
- MIS gives a fixed and safe monthly income, but it’s taxable.
- RD grows steadily, but again, interest is taxable.
- When you combine them correctly, the effective annualized return (XIRR) ranges between 5.2% and 7.4%, depending on your tax bracket.
Even for someone with zero tax liability, the combo doesn’t yield more than 7.4%, which is just the MIS rate itself.
Should You Still Consider This Strategy?
This combination can be useful only if you are looking for predictable income and capital safety — not for maximizing returns.
Suitable for:
- Retirees or senior citizens who want monthly income and safety.
- Low or zero-tax individuals who prefer guaranteed returns.
Not suitable for:
- High-tax individuals (since both interests are taxable).
- Anyone looking for inflation-beating long-term growth.
If you fall in a higher tax bracket, you can explore:
- PPF (Public Provident Fund) – 7.1% tax-free.
- SCSS (Senior Citizens Savings Scheme) – 8.2% (taxable but higher rate).
- RBI Floating Rate Bonds – around 7.05% (taxable, but linked to G-sec yield).
Final Thoughts
Before jumping into any viral investment “hack,” always pause and verify a few things:
- Is the interest taxable or tax-free?
- What is the actual compounding frequency?
- Is the return calculation method (XIRR) correct?
- Are the numbers realistic or just simplified averages?
In this case, the so-called 8.8% return is nothing but a myth.
The real post-tax returns from the MIS + RD combo will range between 5.2% to 7.4%, depending on your tax situation.
So yes, this is a safe and steady combination, but not a high-return investment. Always focus on post-tax, real returns — because that’s what truly matters to your wealth.