Post Office Monthly Income Scheme (POMIS)

Like any nationalised bank, the Post Office has been a trusted place for depositing and transacting with money. This is especially true for the elder generation. A number of saving schemes are offered by branches of the Post Office across the country. 

Post Office Monthly Income Scheme is one such scheme where you invest a certain amount and earn a fixed interest every month. As the name suggests, you can invest in this from any post office. 

In this article, we will cover the following aspects of POMIS.

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Post Office Monthly Income Scheme

Post Office offers POMIS among a host of banking products and services, under the purview of the Finance Ministry. Hence, it is highly reliable. It is a low-risk MIS and generates a steady income. 

You can invest up to Rs.4.5 lakh individually or Rs. 9 lakh jointly, and the investment period is 5 years. Capital protection is its primary objective. For the quarter ending 30 September 2021, the interest rate is 6.6% per annum, payable monthly.

For instance, Mr Sharma has invested Rs.4.5 lakh in the post office monthly investment scheme for 5 years. As mentioned above, the interest rate is 6.6% p.a. His monthly income will be Rs.2,475 for that period. Post-maturity, he can withdraw his deposit, Rs.4.5 lakh, either from any post office or get it transferred to his savings account via Electronic Clearance Service. Alternatively, the account can be renewed.

Features & Benefits of Post Office Monthly Income Scheme

• Capital protection: Your money is safe until maturity as this is a government-backed scheme. 
• Tenure: The lock-in period for Post Office MIS is 5 years. You can withdraw the invested amount when the scheme matures or reinvest it. 
• Low-risk investment: As a fixed income scheme, the money you invested is not subject to market risks and is quite safe. 
• Affordable deposit amount: You can start with a nominal initial investment of Rs.1,000. As per your affordability, you can invest in multiples of this amount. 
• Guaranteed returns: You earn income in the form of interest every month. The returns are not inflation-beating but are higher compared to other fixed-income investments like FD. 
• Tax-efficiency: Your investment is not covered under Section 80C; TDS is not applicable either. 
• Payout: You will receive the payout after one month from making the first investment, and not the beginning of every month. 
• Multiple account ownership: You can open more than one account in your name. But the total deposit amount cannot exceed Rs.4.5 lakh in all of them together. 
• Joint account: You can open a joint account with 2 or 3 people. In this case, an aggregate sum of up to Rs.9 lakh can be invested in this account.
• Fund movement: The investor can move the funds to a recurring deposit (RD) account, which is a feature Post Office has added recently. 
• Nominee: The investor can nominate a beneficiary (a family member) so that they can claim the benefits and corpus if the investor passes away during the account’s term. 
• Ease of money/interest transaction: You may collect the monthly interest directly from the post office or get it transferred automatically to your savings account. Reinvesting the interest in a SIP is also a lucrative option. 
• Reinvestment: You may reinvest the corpus post maturity in the same scheme for another block of 5 years to continue earning benefits.

Eligibility criteria to open a POMIS account

• Only a resident Indian can open a POMIS account. 
• NRIs cannot enjoy the benefits of this scheme. 
• Any adult can open an account. 
• You can open an account on the behalf of a minor who is aged 10 years and above. They can avail the fund when they become 18 years old. 
• A minor, after attaining majority, has to apply for conversion of the account in his name.

Account Type	Maximum Deposit Amount Allowed
Single Account	Rs.4.5 lakh
Joint Account (2 or 3 adults)	Rs.9 lakh

How to open a POMIS Account

Opening a POMIS account is not as tedious as you think. Instead of imagining long queues and even longer paperwork, please take a look at the step-by-step procedure.

• Open a post office savings account, if you haven’t already.
• Collect a POMIS application form from your Post Office.
• Submit the duly filled form along with a photocopy of your ID and residential proofs and 2 passport-size photos at the Post Office. Do carry the originals for verification.
• Get the signatures of your witness or nominee(s) on the form.
• Make the initial deposit via cash or cheque. In the case of a post-dated cheque, the date on the cheque will be the account opening date.
• Once the processing is done, the executive at Post Office will provide you with the details of your newly opened account.

Consequences of early withdrawal

Time of POMIS withdrawal	Outcomes of premature withdrawal
Before completing one year	Zero benefits
Between 1st and 3rd year	Entire deposit refunded after deducting a 2% penalty
Between 3rd and 5th year	Entire corpus refunded with 1% penalty

Comparing Post Office MIS with other Monthly Income Plans

POMIS	Monthly Income Mutual Fund	Monthly Income Insurance
Assured income at an annual rate of 6.6%	Invested in 20:80 equity-debt ratio and hence no guaranteed income	Monthly annuities (rates vary based on premiums & period)
No TDS	TDS applied	Annuity is taxed
Fixed return rate	Floating rate as per the market movement	NA
Low-risk, suitable for the risk-averse	Suitable for people with a high-risk appetite	Double benefits of investment & insurance
Withdrawal permitted after 12 months with penalty	Exit load applicable if withdrawn before time	Higher surrender charges as this is a long-term investment
Limit of Rs. 4.5 lakhs per account and Rs. 9 lakhs for a shared account	No investment limit	No investment limit

Who should invest in POMIS?

POMIS has the flexibility and reliability that appeal to risk-averse investors, albeit with limited tax benefits. If you think, you belong to that category, now is the time to consider starting one.

Frequently Asked Questions

How is the individual account holder’s share calculated in the case of a joint account?

Each joint account holder will have an equal share in each joint account.

What if I don’t want to withdraw the deposit amount upon the account maturity?

In case you don’t withdraw the deposit amount upon maturity, the money will stay in the account and earn a simple interest as per the Post Office Savings Account for a period of two years from the account maturity.

Is this scheme suitable for senior citizens?

Yes. This is a favourable scheme for senior citizens as they can deposit their life savings in the account and earn interest for their monthly expenses.

What happens to my account if I have to move from one city to another due to work?

In the event of shifting from one city to another, you can easily transfer your POMIS account to the Post Office in the current city at no extra cost.