An earning individual looks for the investment opportunities that are safe and secure with some fixed, regular income, and Post Office Monthly Income Scheme is such a type of saving scheme in which you can invest and earn a fixed interest income every month.
Post Office Monthly Income Scheme is suitable for those investors who are seeking fixed monthly income but are unwilling to take any risks in their investments. Thereby, it is more favorable for retired individuals or senior citizens or long term investors.
Why should you invest in POMIS?
Capital protection: As the POMIS is a government-backed scheme, your invested capital is safe until matured or redeemed.
Low-risk investment: It is a fixed income scheme without any market risks. Hence, POMIS is considered quite safe.
Guaranteed returns: The interest income is credited directly to the investor’s post office savings account on a monthly basis by ECS/CBS. Moreover, income is higher compared to other fixed-income investments like FD.
Reinvestment: You may reinvest the corpus post maturity in the same scheme for another 5 years to enjoy the double benefits. Recently, the post offices have allowed reinvesting the funds in Post Office Recurring Deposit.
Transferrable: In case you are changing your residential status to a different city in India, you can transfer your POMIS account to another city’s post office. Your investment corpus and interest will be carried forward to such a post office.
Let’s understand every aspect/features of the Post Office Monthly Income Scheme and how it is beneficial for you:
- Any residential individual can open the POMIS account in single or jointly (maximum three holders). You can also convert a single account into joint accounts.
- A minor more than the age of 10 years can also operate.
- Non-residents are not eligible to apply for this scheme.
Minimum amount to open the account:
An eligible person can open the account under POMIS with the minimum investment of Rs. 1,500
The maximum investment limit on the cumulative basis is Rs. 4.5 lakhs in a single holding account, and for jointly held accounts, it is Rs.9 lakhs. Further, the Maximum amount that a minor can invest is Rs.3 lakh.
Note: Once the minor attains the majority. He/She has to apply for the conversion of the account as a major.
Tenure of the scheme:
The maturity period for Post Office MIS is five years i.e. when you open a monthly income scheme with a post office, you are not allowed to withdraw the deposited amount prior to 5 years. Therefore, you can withdraw the invested amount when the scheme matures or reinvest it.
The Central government fixes the interest rate on the Post Office Monthly Income Scheme. Finance Ministry resets interest every quarter. The change of interest rate depends on the yield from government bonds of similar tenure.
Currently, the interest rate of POMIS for Q1 FY20-21 (April – June 2020) is 6.60%. The interest rates are revised every quarter. The interest rate is calculated on an annual basis and is paid monthly to the depositors.
Interest rates of previous quarters were as follows:
|Period||Interest Rate (%) on Post Office MIS (annual)|
|1st April 2020 – 30th June 2020||6.60 (current rate)|
|1st April 2018 – 30th June 2018||7.3|
|1st January 2018 – 31st March 2018||7.3|
|1st October 2017 – 31st December 2017||7.5|
|1st July 2017 – 30th September 2017||7.5|
|1st April 2017 – 30th June 2017||7.6|
There is no Tax Deducted at Source (TDS) implications on the interest amount. Similarly, it also does not attract any tax benefits under Section 80C, and the income is subject to taxation.
The investor can avail the facility of nominations (a family member). So that they can claim the benefits after death of investor.
How to open a POMIS Account?
Opening an account under the Post Office Monthly Income Scheme (POMIS) is a simple and hassle-free process. Here is the procedure to be followed:
1. Before applying for the POMIS, you need to open a post office saving account.
2. Ask for the POMIS application form from your nearest post office.
3. Fill the details and submit the form along with the self-attested copy of following documents and make sure to carry the originals for verification:
- Identity proof (Aadhaar, Voter ID, Passport, Driving License, etc.)
- Residential proof
- Two passport size photos
4. Collate signatures of witnesses or beneficiaries
5. Make the minimum initial investment of Rs. 1,500 via cash or cheque. In the case of cheque, the date mentioned on the cheque is considered as the account opening date.
Consequences of Premature withdrawal of the Scheme:
In case you wish to withdraw your investment corpus before the lock-in period of 5 years, a penalty is charged on the premature withdrawal. The amount of penalty depends on the time of such redemption as below:
|POMIS Withdrawal time||Consequences|
|Withdraw amount before one year||No benefits are available|
|If you redeem your investment within the 1st and 3rd year||The deposited amount shall be refunded after charging penalty of 2%|
|If you redeem within the 3rd and 5th year||The entire corpus shall be refunded after charging penalty of 1%|
Comparing Post Office MIS with other Monthly Income Plans
Here is a comparison of POMIS and monthly plans, which will help you to choose your desired plans:
|Basis of difference||POMIS||Mutual funds monthly plans||Insurance monthly income plan|
|Income Guarantee||Guaranteed |
monthly income @6.60%
|No monthly income guarantee with an Equity debt ratio of 20:80||Monthly annuities depend upon the premiums and tenure|
|Fixed/Floating return||Fixed return||Floating return subject to market fluctuations||Fixed|
|TDS Implications||No TDS||TDS Applicable||Monthly annuity is taxable|
|Risk||Suitable for risk-averse||Suitable for risk-takers||Suitable for dual benefits of investment and insurance|
|Maximum limit of investment||The Maximum investment limit on the cumulative basis is Rs. 4.5 lakhs in a single holding account. For jointly held accounts, it is Rs.9 lakhs.||No maximum investment limit||No maximum investment limit|