Can You Actually Earn 8.8%?

Social media claims Put up Workplace MIS + RD provides 8.8% returns. Is it true? Discover the actual post-tax XIRR and bust the parable of so-called specialists.

Each few months, new movies and social media posts declare to have “found” a wise trick to earn larger returns from Put up Workplace schemes. One such viral concept doing the rounds is —

“Spend money on the Put up Workplace Month-to-month Earnings Scheme (MIS) and reinvest the month-to-month curiosity in a Recurring Deposit (RD) — you’ll get 8.8% returns!”

A government-backed, risk-free 8.8% return sounds too good to disregard. However as I at all times say, in private finance, if one thing sounds too good to be true, it normally is.

So, let’s break down this declare utilizing the precise Put up Workplace rates of interest for Oct–Dec 2025perceive how MIS and RD work, and calculate the actual return (XIRR) for various tax conditions — together with zero tax.

Put up Workplace MIS + RD Returns: Can You Actually Earn 8.8%?

Understanding the Fundamentals: What Are MIS and RD?

Earlier than calculating returns, we have to perceive how every of those schemes capabilities.

Put up Workplace Month-to-month Earnings Scheme (MIS)

• You make investments a lump sum quantity (say Rs.9,00,000).
• The federal government pays you month-to-month curiosity for five years.
• Present rate of interest (Oct–Dec 2025): 7.4% per 12 months (as per Basunivesh.com Put up Workplace Curiosity Charges Replace).
• You obtain Rs.9,00,000 × 7.4% ÷ 12 = Rs.5,550 monthly as curiosity.
• After 5 years, your Rs.9,00,000 principal is returned in full.

So, MIS is principally an income-generating scheme. It doesn’t reinvest the curiosity — it’s important to manually use or reinvest that month-to-month earnings.

Put up Workplace Recurring Deposit (RD)

• In RD, you make investments a hard and fast quantity each month for five years.
• It earns 6.7% annual curiosity, compounded quarterly (not month-to-month).
• On the finish of 5 years, you obtain your complete deposits + gathered curiosity.

RD is right for individuals who need to construct financial savings progressively. Now, on this “viral combo technique,” the MIS month-to-month curiosity is being redirected into an RD each month.

The Viral Declare — “Earn 8.8% Return!”

Right here’s the story many movies and posts inform:

1. Make investments Rs.9,00,000 in MIS.
2. Obtain Rs.5,550 monthly as curiosity.
3. Deposit Rs.5,550 each month right into a 5-year RD (incomes 6.7%).
4. After 5 years, get Rs.9 lakh (MIS maturity) + Rs.3.9 lakh (RD maturity).
5. Whole maturity = Rs.12.9 lakh.
6. Therefore, 8.8% return!

At first look, it appears to be like completely logical. However if you dig deeper, you’ll understand it’s mathematically flawed. Let’s see why.

Why This Calculation is Improper

1. It Ignores Taxes

Each MIS and RD curiosity are totally taxable beneath “Earnings from Different Sources.”
In the event you fall in a 20% or 30% tax slab, your efficient return falls sharply.
Even in case you are within the 0% tax bracket, do not forget that no Put up Workplace scheme (aside from PPF or Sukanya Samriddhi) provides tax-free curiosity.

• It Assumes Month-to-month Compounding for RD

That is the most typical mistake in viral calculations.
Put up Workplace RD compounds quarterlynot month-to-month.
Meaning each three months, the curiosity is added to the steadiness — not each month. Therefore, the maturity quantity will likely be decrease than what these viral posts declare.

• It Makes use of Easy Averages As a substitute of XIRR

If you make investments at totally different occasions (like each month into an RD), you can’t simply add up complete returns and divide by the variety of years.
The proper approach to discover the true annualized return is through the use of the XIRR (Prolonged Inner Price of Return) technique, which accounts for the timing of each money influx and outflow.

Let’s Calculate the Actual Return (Utilizing Precise Charges)

Let’s assume you make investments Rs.9,00,000 in MIS at 7.4%, and the month-to-month curiosity is invested in a 5-year RD at 6.7% (quarterly compounding).

We’ll calculate for 4 tax situations:

1. Zero tax legal responsibility
2. 5% slab
3. 20% slab
4. 30% slab

Widespread Assumptions

• MIS Curiosity Price: 7.4%
• RD Curiosity Price: 6.7% (quarterly compounding)
• Length: 5 years (60 months)
• Preliminary Funding: Rs.9,00,000
• RD began every month with post-tax MIS curiosity.

Case 1: Zero Tax Legal responsibility

You obtain the total Rs.5,550/month from MIS and reinvest it in RD.

RD Maturity Calculation (6.7% compounded quarterly):
After 60 month-to-month deposits of Rs.5,550, your RD matures at roughly Rs.3.96 lakh.
On the finish of 5 years, you additionally get again Rs.9,00,000 from MIS.

Whole Maturity = Rs.9,00,000 + Rs.3,96,000 = Rs.12,96,000

Once we calculate the Xirrit really works out to round 7.4% per 12 months.

So, for somebody who pays zero tax, this combo roughly equals the MIS price itself. There’s no “additional magic” occurring right here — the 8.8% declare is solely improper.

Case 2: 5% Tax Slab

Tax reduces your month-to-month reinvestment to Rs.5,272 (Rs.5,550 – 5%).

Your RD matures at roughly Rs.3.76 lakhand also you get again Rs.9 lakh from MIS.

Whole Maturity = Rs.12,76,000
Xirr = ~ 7.1% per 12 months

Case 3: 20% Tax Slab

After 20% tax, your reinvestment falls to Rs.4,440/month.

Your RD matures at roughly Rs.3.12 lakhand MIS principal of Rs.9 lakh is returned.

Whole Maturity = Rs.12,12,000
Xirr = ~ 6.2% per 12 months

Case 4: 30% Tax Slab

After 30% tax, you possibly can reinvest solely Rs.3,885/month.

Your RD matures at roughly Rs.2.72 lakhplus Rs.9 lakh MIS principal.

Whole Maturity = Rs.11,72,000
Xirr = ~ 5.2% per 12 months

Abstract Desk: Practical Returns from MIS + RD Combo

The Fact: There Is No 8.8% Return Right here

The 8.8% return determine being circulated on-line is fully improper.
It ignores tax, assumes incorrect compounding, and makes use of an unrealistic calculation technique.

Right here’s what’s actual:

• MIS provides a mounted and secure month-to-month earningshowever it’s taxable.
• RD grows steadily, however once more, curiosity is taxable.
• If you mix them accurately, the efficient annualized return (XIRR) ranges between 5.2% and seven.4%relying in your tax bracket.

Even for somebody with zero tax legal responsibilitythe combo doesn’t yield greater than 7.4%which is simply the MIS price itself.

Ought to You Nonetheless Think about This Technique?

This mix will be helpful solely in case you are in search of predictable earnings and capital security — not for maximizing returns.

Appropriate for:

• Retirees or senior residents who need month-to-month earnings and security.
• Low or zero-tax people preferring assured returns.

Not appropriate for:

• Excessive-tax people (since each pursuits are taxable).
• Anybody in search of inflation-beating long-term development.

In the event you fall in a better tax bracket, you possibly can discover:

• PPF (Public Provident Fund) – 7.1% tax-free.
• SCSS (Senior Residents Financial savings Scheme) – 8.2% (taxable however larger price).
• RBI Floating Price Bonds – round 7.05% (taxable, however linked to G-sec yield).

Remaining Ideas

Earlier than leaping into any viral funding “hack,” at all times pause and confirm just a few issues:

1. Is the curiosity taxable or tax-free?
2. What’s the precise compounding frequency?
3. Is the return calculation technique (XIRR) appropriate?
4. Are the numbers practical or simply simplified averages?

On this case, the so-called 8.8% return is nothing however a delusion.
The actual post-tax returns from the MIS + RD combo will vary between 5.2% to 7.4%relying in your tax scenario.

So sure, this can be a secure and regular mixturehowever not a high-return funding. All the time give attention to post-tax, actual returns — as a result of that’s what actually issues to your wealth.