Post Office Monthly Income Scheme (POMIS) – Interest Rate and All You Need to Know

In the bustling world of investments, the Indian postal service offers a reliable and secure haven for investors seeking a guaranteed return. Enter the Post Office Monthly Income Scheme (POMIS), a remarkable investment plan that has captured the attention of seasoned investors across the nation.

It’s also known as MIS Post Office Scheme. With a generous 7.1% per annum interest rate, POMIS stands tall as an attractive option for those looking to park their funds with confidence.

As a government-backed small savings scheme, POMIS allows investors to set aside a specific sum every month, ensuring a stable and fixed monthly income. The interest, which is higher than many debt instruments, is paid out on a monthly basis, giving investors the double advantage of keeping their capital intact while reaping the benefits of a regular income stream.

The Post Office depository service offers a plethora of schemes, all of which come with the assurance of a sovereign guarantee, making them safer alternatives to equity shares and several fixed-income options. Among these schemes, POMIS, along with Post Office Savings Account, Post Office Recurring Deposit, and Post Office Time Deposit, is one of the highest-earning investment vehicles, boasting an impressive interest rate of 6.7%.

With the Ministry of Finance’s stamp of approval, the Post Office Monthly Income Scheme promises a steady financial journey for investors who seek security, better returns, and a consistent monthly income.

Key Features of Post Office Monthly Income Scheme (POMIS)

Here are some of the key features that make POMIS an attractive investment option for many:

1. Transferability: POMIS accounts can be transferred from one post office to another without any charges, ensuring convenience and continuity for investors on the move.
2. Multiple accounts: Investors can open multiple POMIS accounts, but the total value should not exceed Rs. 9 lakhs, as per the Union Budget 2023.
3. Reinvestment: The maturity amount realized at the end of the term can be reinvested in POMIS, allowing for continuous investment opportunities.
4. Nomination: Investors can appoint a nominee for their POMIS account, and in the case of multiple nominees, the primary account holder must specify the share of entitlement for each beneficiary.
5. Taxation: While there is no TDS (Tax Deduction at Source) on POMIS interest, the interest earned is taxable.
6. Maturity options: At the end of the 5-year scheme, investors can either withdraw the total accrued amount or reinvest in the scheme, while still receiving their fixed monthly income.
7. Lock-in period: POMIS has a 5-year lock-in period, during which the invested amount cannot be withdrawn.
8. Investment limits: The maximum investment in the scheme is Rs. 4.5 Lakh for individuals and Rs. 9 Lakh for joint accounts, with a minimum investment of Rs. 1,500.
9. Joint account: Up to 3 individuals can open a joint POMIS account, with each investor possessing equal rights over the account.
10. Minor account: POMIS accounts can be opened for children aged 10 and above, with the option to withdraw the amount after the child turns 18.
11. Eligibility: Indian citizens are eligible to open a POMIS account, but NRIs cannot.
12. Auto-withdrawal: Investors can opt for automatic withdrawal of monthly interest through PDCs or ECS, or direct transfer to any CBS-centric savings account if the POMIS account is with a CBS Post Office.
13. Penalty: Early withdrawal before the lock-in period attracts a penalty on the withdrawal amount, depending on the time of redemption.
14. Investment amount: Investments in POMIS can be made in multiples of Rs. 1000.
15. Tax benefits: Although POMIS interest does not incur TDS, it also does not attract any tax benefits under Section 80C.

The following table demonstrates the maximum investment limit for the Post Office Monthly Income Scheme.

Eligibility Criteria

1. Single adults: Individuals aged 18 or above can open a POMIS account in their name, making it an ideal investment option for working professionals, self-employed individuals, and retirees seeking a steady monthly income.
2. Joint accounts: Up to three adults can come together to open a joint POMIS account, which is particularly suitable for family members, friends, or business partners looking to pool their resources for collective investment purposes.
3. Guardians: Parents or legal guardians can open a POMIS account on behalf of minors or persons of unsound mind, ensuring financial security and a regular income stream for dependents who cannot manage their finances independently.
4. Minors: Children above the age of 10 can open a POMIS account in their name, instilling the habit of saving and investing from an early age, while providing a source of income when they turn 18.

Deposit and Interest Specifications

1. Minimum investment: Investors can start with a minimum investment of Rs. 1,000 and make additional deposits in multiples of Rs. 1,000. This low-entry threshold makes POMIS accessible to investors from various income groups.
2. Maximum investment: As per the Union Budget 2023, the maximum investment limit for single accounts is Rs. 9 lahks, while for joint accounts, it is Rs. 15 lakh. This cap ensures a fair distribution of investment opportunities among the population.
3. Equal shares: In joint accounts, all individual account holders have an equal share in the investment, promoting equitable distribution of income and financial responsibilities among the investors.
4. Aggregate deposit limit: The total deposits across all MIS accounts held by a single individual should not exceed Rs. 9 lakh, as per the Union Budget 2023. This rule prevents any misuse or over-concentration of investments in POMIS.
5. Minor account limits: Separate limits are applicable for opening a minor’s account, ensuring that investment options remain accessible and well-distributed across all age groups.
6. Monthly interest payments: POMIS pays interest on a monthly basis until the account reaches maturity, providing a steady income stream for investors to meet their financial needs or reinvest in other avenues.
7. Tax implications: While the interest earned on POMIS is taxable at the hands of the depositor, there is no Tax Deducted at Source (TDS), allowing investors to manage their tax liabilities accordingly.
8. Unclaimed interest: It is crucial for investors to claim their monthly interest, as any unclaimed interest does not earn additional interest, potentially leading to a loss of potential income.

Residential Criteria

1. POMIS accounts are exclusively available to resident Indians, with non-resident Indians being ineligible. This criterion ensures that the investment opportunity remains accessible to Indian residents who contribute to the country’s economy.
2. Account holders must be aged 18 or above to independently manage their investments, ensuring a certain level of financial maturity and understanding of the investment process.
3. Accounts can be opened on behalf of minors aged 10 or above, allowing parents or guardians to secure their children’s financial future from an early age. Once these minors turn 18, they can access the funds and manage their accounts independently.

Documentation Required

• Identity Proof: Copy of government-issued ID such as Passport / Voter ID card / Driving License/Aadhaar, etc.
• Address Proof: Government-issued ID or recent utility bills.
• Photographs: Passport-size photographs.

How to Open POMIS Account?

Opening a Post Office Monthly Income Scheme (POMIS) account is a straightforward process that can provide you with a secure and stable monthly income. Here’s a step-by-step guide on how to open a POMIS account:

1. Open a Post Office savings account: Before you can open a POMIS account, you must have a Post Office savings account. If you don’t already have one, visit your nearest Post Office to open one.
2. Obtain a POMIS application form: You can either visit your local Post Office and request an application form or download the POMIS Account application form online by clicking here.
3. Complete the form: Fill in the required details on the application form, including personal information, nominees (if any), and initial deposit amount (minimum Rs. 1,000).
4. Gather necessary documents: Prepare self-attested photocopies of your ID proof, address proof, and two passport-sized photos. Remember to bring the original documents for verification.
5. Submit the form and documents: Head to your nearest Post Office and submit the completed application form along with the required documents. The Post Office staff will verify your original documents before accepting the application.
6. Provide nominee details: Mention the name, date of birth, and mobile number of the nominees (if any) on the application form.
7. Make the initial deposit: Proceed to make the initial deposit (minimum Rs. 1,000) via cash or cheque.

How Does POMIS Work? – POMIS Calculation

1. Open a POMIS account: Open either an individual or joint account and provide the necessary documents such as address and identity proof, along with passport-sized photographs.
2. Investment limits: For a single account, the minimum investment amount is Rs. 1,000, and the maximum is Rs. 4,50,000. For a joint account, the minimum investment amount remains Rs. 1,000, while the maximum increases to Rs. 9,00,000.
3. Interest earnings: The interest rate is fixed annually and paid out monthly. At the end of the scheme’s tenure, the initial deposit is returned.
4. Withdrawal options: Monthly interest earnings can be withdrawn directly from the post office or credited to the investor’s savings account via Electronic Clearing Service (ECS).

POMIS Calculation Example

Let’s assume Mr Gupta invests in POMIS with the following details:

• Investment amount: Rs. 3,00,000
• Maturity period: 5 years
• Annual interest rate: 6.60%

To calculate his monthly income, we use this formula:

Monthly Income = (Investment Amount x Annual Interest Rate) / 12

Plugging in the numbers:

Monthly Income = (3,00,000 x 6.60%) / 12 Monthly Income = Rs. 1,650

In this example, Mr Gupta can expect to receive a fixed monthly income of Rs. 1,650 throughout the 5-year maturity period. At the end of the scheme’s tenure, he will receive his initial investment of Rs. 3,00,000 back.

Post Office MIS vs. Fixed Deposit (FD) vs. National Savings Certificate (NSC)

Post Office MIS, Fixed Deposits, and National Savings Certificates are all secure investment options for investors seeking assured returns. Each has its unique features, such as varying interest rates, tax implications, and maturity periods. Investors should weigh their risk tolerance and financial goals when choosing between these options.

How is POMIS Different from Other Monthly Income Schemes?

POMIS, Mutual Funds Monthly Income Plans, and Insurance Monthly Income Plans cater to different investor needs and preferences. POMIS offers a fixed monthly income, while the other two options involve varying degrees of market risk and benefits. Evaluating the differences can help investors choose the most suitable monthly income scheme based on their risk appetite, investment horizon, and financial goals.

Can You Withdraw Money Before 5 Years from POMIS?

Post Office Monthly Income Scheme (POMIS) is designed as a long-term investment with a maturity period of 5 years. However, situations may arise where an investor needs to withdraw the deposited amount before the completion of the tenure. In such cases, premature withdrawals are allowed, but with certain penalties.

Here’s what happens when you withdraw money before 5 years from POMIS:

1. Within the first year of deposit: No withdrawal is permitted within the first year of opening the account. No benefits are available for premature closure during this period.
2. Between 1 to 3 years of account opening: If you decide to close the account during this period, a penalty of 2% of the principal amount is levied. The remaining balance, after deducting the penalty, will be transferred to your account.
3. Between 3 to 5 years of account opening: If you close the account during this period, a penalty of 1% of the principal amount is applicable. After deducting the penalty, the remaining balance will be transferred to your account.

In summary, you can withdraw money before the 5-year term from POMIS, but penalties will be imposed depending on the period of withdrawal. It’s essential to consider these penalties and weigh the necessity of the withdrawal against the potential loss before deciding to close the account prematurely.

Disadvantages of POMIS

While the Post Office Monthly Income Scheme (POMIS) is a popular investment option among risk-averse investors, it does come with certain drawbacks that one must consider before investing. Here are some of the major disadvantages of the scheme:

1. No tax rebate under Section 80C: POMIS does not offer any tax benefits under Section 80C of the Income Tax Act. As a result, the investments made in this scheme are not eligible for tax deductions, which may deter some investors from seeking tax-saving opportunities.
2. Idle monthly payouts: If an investor does not withdraw the monthly interest payouts, the money remains idle and does not earn any additional interest. This lack of compounding can impact the overall returns on investment, especially for investors who prefer to let their interest accumulate over a longer period.
3. Taxable interest income: Although there is no Tax Deducted at Source (TDS) applicable to POMIS, the interest income generated from the scheme is taxable. Investors must declare this income while filing their annual income tax returns, which may result in a higher tax liability depending on their overall earnings and tax slab.

Current Interest Rates on Post Office Monthly Income Scheme (Revised)

The interest rate on the Post Office Monthly Income Scheme (POMIS) has been revised periodically over the years. The rate has experienced a significant decrease from 8.40% to 7.1%, payable monthly. It’s important to note that the income earned by interest through this scheme is taxable.

The Finance Ministry and the Central Government of India fix the POMIS interest rate, and it is often revised every quarter depending on the returns generated by government bonds of similar tenure.

Here is a table displaying the current and previous interest rates for POMIS:

* Please note that the rates mentioned above are subject to change as per government notifications, and interest payouts on POMIS occur monthly.

Frequently Asked Questions (POMIS FAQs)

Q 1. Can a single account be changed to a joint account?

Yes, a single POMIS account can be converted into a joint account by submitting a request at the post office where the account is held.

Q 2. What is the minimum balance that I need to maintain in a Post Office MIS scheme?

The minimum investment required for a Post Office MIS scheme is Rs. 1,000.

Q 3. What is the shortest time a deposit should be held before being withdrawn prematurely?

The minimum lock-in period before withdrawing funds prematurely from POMIS is one year.

Q 4. How can a nominee or legal heir obtain the funds of a deceased depositor?

A nominee or legal heir can claim the funds of a deceased POMIS account holder by submitting the necessary documents and a claim application to the post office.

Q 5. What is the share that each account holder receives in the case of a joint account?

In a joint POMIS account, each account holder receives an equal share of the funds.

Q 6. How can I withdraw money from my POMIS account after the tenure?

You can withdraw your funds from a POMIS account after the scheme’s tenure by visiting the post office and submitting a withdrawal form.

Q 7. Can I transfer the POMIS account?

Yes, you can transfer a POMIS account from one post office to another by submitting a transfer request at the post office where the account is held.

Q 8. Can I reinvest my accumulated amount in POMIS?

The accumulated amount in a POMIS account can be reinvested in another POMIS account after maturity, subject to the investment limits.

Q 9. Is there any Tax deduction at the source?

POMIS does not have Tax Deduction at Source (TDS) on interest income, but the interest earned is taxable.

Q 10. Is there any nomination facility available in POMIS?

Yes, a nominee can be appointed for a POMIS account during the account opening process or later.

Q 11. Does the scheme offer tax rebates?

POMIS does not offer any tax rebate under Section 80C of the Income Tax Act.

Q 12. Can a senior citizen also invest in POMIS?

Yes, senior citizens can invest in the Post Office Monthly Income Scheme.

Q 13. From where can I get the withdrawal form for POMIS?

You can obtain the withdrawal form for POMIS from your local post office or download it from the India Post website.

Q 14. What happens when the investor does not withdraw the funds after 5 years?

If an investor does not withdraw their funds from a POMIS account after the 5-year tenure, the funds will continue to earn interest at the applicable savings account rate.

Q 15. Is Premature Withdrawal of the POMIS allowed?

Yes, premature withdrawal is allowed in the Post Office Monthly Income Scheme after one year.

Q 16. What are the penalties for premature withdrawal from a POMIS account?

The penalties for premature withdrawal from a POMIS account are 2% of the principal amount for withdrawals between 1 to 3 years and 1% of the principal amount for withdrawals between 3 to 5 years.

Q 17. How is the interest income from POMIS taxed?

The interest income from POMIS is taxable according to the investor’s income tax slab rate.

Q 18. What is the maximum investment limit for POMIS?

The maximum investment limit for a single POMIS account is Rs. 4,50,000, and for a joint POMIS account, it is Rs. 9,00,000.

Q 19. How is the interest paid on POMIS accounts?

The interest on POMIS accounts is paid monthly, either through direct credit to the investor’s savings account at the post office or via Electronic Clearing Service (ECS) to a bank account.

Q 20. Can I open a POMIS account online?

No, currently, you cannot open a POMIS account online. You need to visit your nearest post office to open a POMIS account.