1. 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 lakhs individually or Rs. 9 lakhs jointly, and the investment period is 5 years. Capital protection is its primary objective. For the quarter ending 31 March 2019, interest rate is 7.7% per annum, payable monthly.
For instance, if Sharma has invested Rs. 4.5 lakhs in the post office monthly investment scheme for 5 years. As mentioned above, the interest rate is 7.7%. His monthly income will be Rs. 2888 for that period. Post-maturity, he can withdraw his 4.5 lakhs, either from any post office or get it to his savings account via Electronic Clearance Service.
2. 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.
Start small: You can start with a nominal initial investment of Rs. 1500. As per your affordability, you can multiply this amount.
Guaranteed returns: You earn income in the form of interest every month. The returns are not inflation-beating, but is higher compared to other fixed income investments like FD.
Tax-efficiency: Though your post office investment doesn’t fall under Section 80C and the income is subject to taxation. On the other hand, it has no TDS either.
Eligibility: Only a resident Indian can open a POMIS account. NRIs cannot enjoy the benefits of this scheme. You can open it in your child’s name too, provided he/she is aged 10 or above.
Payout: You will receive the payout 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 lakhs in all of them together.
Joint account: You can open a joint account with 2 or 3 people. Regardless of who is contributing, it belongs to all account holders equally.
Fund movement: The investor can move the funds to an RD (recurring deposit), which is a feature Post Office has added recently.
Age: As mentioned above, you can start an account on behalf of a minor who is of age 10 and above. They can avail they fund when they become 18. However, the investment cannot exceed Rs. 3 lakhs for a minor. Minor after attaining majority has to apply for conversion of the account in his name.
Nominee: The investor can nominate a beneficiary (a family member) so that they can claim the benefits and corpus if the investor passes away.
Ease of money/interest transaction: You may collect the monthly interest directly from the post office or transfer it to your savings account. Reinvesting the interest in an SIP is also lucrative option.
Transfer: In the event of shifting from one city to another, you can easily transfer your investment to your post office in the current city at no extra cost.
Reinvestment: You may reinvest the corpus post maturity in the same scheme for another 5 years to get double benefits.
3. How to open a POMIS Account
Opening a post office monthly income scheme is not as tedious as you think. Before 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 Xerox copy of your ID, residential proofs and 2 passport-size photos at the post office. Please don’t forget to carry the originals for verification.
- You will need to get the signatures of your witness or nominee(s) on the form.
- Make the initial deposit via cash or cheque. If you give a post-dated cheque, that date will be considered as the account opening date.
4. Consequences of early withdrawal of the scheme
| Time of POMIS withdrawal |
Outcome of premature withdrawal |
| If you withdraw before one year |
Zero benefits |
| To close the account between 1st and 3rd year |
The whole deposit refunded after 2% penalty |
| If you close the scheme between 3rd and 5th year |
Entire corpus refunded with only 1% penalty |
5. Comparing Post Office MIS with other Monthly Income Plans
| POMIS |
Monthly Income Mutual Fund |
Monthly Income Insurance |
| Assured income at 7.7% annual rate |
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 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 |
In short, 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.
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