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Post Office Monthly Income Scheme (POMIS) is a government backed saving scheme that gives the investors guaranteed returns at an interest rate of 6.60% per annum. The account can be opened by an individual for themselves or jointly. The account can be opened by a guardian or minor above the age of 10 years.
Risk averse investors mostly invest in a POMIS as the scheme offers a fixed monthly income and returns that are relatively better than debt investments.
Key Features of Post Office Monthly Income Scheme (POMIS)
Being a government-backed investment, the returns for Post Office Monthly Income Scheme are guaranteed. As the saving scheme keeps the capital intact, provides better returns, and assures a fixed monthly income – most of the investors consider this scheme to park their funds.
Apart from the mentioned reasons, listed below are a few key features of Post Office Monthly Income Scheme:
1. Interest Rate
Interest in the post office monthly scheme is payable on completion of a month from the opening date and so on till maturity. If the account holder does not claim the monthly interest, such interest shall not earn any additional interest.
2. Maturity
You can close your POMIS account five years after the opening date by submitting a prescribed application form with the passbook at your Post Office. However, if the account holder dies before maturity, the account may be closed, and the nominee or legal heir will get the benefits. The Post Office will only pay interest until the month preceding the refund.
3. Minimum Deposit Amount
The minimum amount for opening a post office MIS account is Rs. 1000. In addition to this, the amount should be a multiple of 100.
4. Maximum Deposit Amount
The maximum amount that single account holders can deposit in the post office MIS account is Rs. 4.5 lakhs. For joint accounts, this amount goes up to Rs. 9 lakhs.
5. Lock-in Period
You cannot withdraw the entire amount from your POMIS account before the maturity period of five years is over.
6. Premature Withdrawal
The following table shows how much of a return you are eligible to get if you withdraw early.
| Time of Withdrawal | Outcome |
|---|---|
| Before one year | Zero benefits |
| Between the first and third year | The whole deposit after a 2% penalty |
| Between the third and fifth year | The whole deposit after a 1% penalty |
7. No Tax Benefits
Unlike some other saving scheme, the post office monthly income scheme does not offer any tax benefits. However, most people do not consider this as a demerit because of its various other merits. If you need to buy a savings plan with tax benefits, you can browse through life insurance plans offered by Canara HSBC Life Insurance.
8. Joint Account Facility
You can open a Post Office Monthly Income Scheme account as a joint account with up to 3 people.
9. Account of Minors
You can open an account for a minor on their behalf as their legal guardian. A child over the age of 10 years can also apply for one in their name.
10. Flexible Nomination Facility
You are free to choose your nominee, who shall receive the refund of your monthly income scheme investment should something happen to you within its tenure.
11. Hassle-free Transactions
The Post Office efficiently handles everything involved in the process from the initial deposit to the monthly return payments. You can set up the interest payments for auto-withdrawal to receive monthly interest payments in a completely hassle-free process. You can also transfer one POMIS amount to another POMIS account.
12. Guaranteed Regular Income
The post office monthly income scheme is a low-risk and government-backed saving scheme. So, you receive guaranteed income regularly. The returns are significant for a short-term investment without risk.
You can also invest in other saving and investment plans like iSelect Guaranteed Future by Canara HSBC Life Insurance that offers guaranteed maturity benefits along with a life cover.
Know more about iSelect Guaranteed Future.
13. Reinvestment
You can decide to reinvest the guaranteed returns you get from the post office MIS scheme towards investments with higher risks that, in turn, have the possibility of higher yields.
14. Transferrable
You are free to transfer your account from one post office to another according to your convenience. If you are moving to another location, you can move your Post Office Monthly Income Scheme account with you as it is; the account will remain unchanged.
Benefits of Post Office Monthly Income Scheme (POMIS)
The post office monthly income scheme offers several benefits, especially for investors seeking to convert their wealth into a regular income. Listed below are a few benefits of the scheme:
1. Hassle-free Transactions
POMIS account allows automatic withdrawal of interest directly to your savings bank or post office account. So, once you deposit the money, you don’t have to visit the post office for at least 5 years to receive the interest.
2. Guaranteed Income
The interest rate of the post office monthly income scheme remains fixed once you start investing. Plus, the scheme is supported by the government of India and carries a sovereign guarantee.
3. Option to Reinvest Interest
If you don’t need to use the money you receive as interest from the POMIS investment, you can use it in other investment options. For example, debt funds for market-linked returns, or a tax-saving equity fund for tax benefits.
4. Hold Jointly with Spouse
You can only deposit up to Rs 4.5 lakhs in the individually held POMIS account. If you hold the account jointly with the spouse or parents, the deposit amount will increase to Rs 9 lakhs.
How does Post Office Monthly Income Scheme (POMIS) Work?
An investor has to open a POMIS account and start making regular investments. The process of opening an account is also simple and easy that requires minimal documentation. The person may choose to ahead with an individual account or a joint account. Listed below is the minimum and maximum investment that is allowed in a POMIS:
| Type of Account | Minimum Investment Amount | Maximum Investment Amount |
|---|---|---|
| Single Account | Rs. 1000 | Rs. 4,50,000 |
| Joint Account | Rs. 1000 | Rs. 9,00,000 |
| Minor Account | Rs. 1000 | Rs. 3,00,000 |
Eligibility Criteria for Opening POMIS Account
POMIS was designed for investors who have low risk appetite as it offers guaranteed returns. Here are the eligibility criteria for opening an account in POMIS:
- You must be an Indian citizen.
- Age of minor account holder should be 10 years or above.
- Joint account can be opened with a maximum of 2 individuals.
- In case, there are only 2 depositors for a joint account, the share of the deposit will be equal. And in case of 3 depositors, the share will be 1/3rd.
Documents Required to Open POMIS Account
POMIS account can be opened with a few very documents that are listed below:
- Photograph: Passport size photographs
- Address Proof: Government issued and self-attested ID or recent utility bills, ratio card, bank or post office passbook.
- Identity Proof: Copy of government issued ID such as Passport, Voter ID Card, Driving License, Aadhar, job card issued by NREGA, which is signed by the State Government Officer.
How to Open a POMIS Account: Step By Step Process
Currently, there is no provision of opening a POMIS account online. The account can be opened up offline and the process is quite easy.
Step 1: If you do not have a Post Office savings account, open one with the Post Office of your choice.
Step 2: Collect or download the application form for the Post Office Monthly Income Scheme.
Step 3: Fill out the form, attach other documents and submit it to the Post Office. Attach the duplicates and carry the originals at the time of submission for verification. All documents must be self-attested.
Step 4: Choose a witness and nominee and have them sign your application form.
Step 5: Make the initial deposit via cash or cheque. In case of payment by cheque, the date of cheque realization will be the account opening date.
Note: You can nominate or change nomination in the POMIS account after opening as well.
Interest Rates on Post Office Monthly Income Scheme Deposit
The interest rate on POMIS deposit is fixed by Finance Ministry and the Central Government of India. Generally, the rates are revised in every quarter, which is decided by the returns that are generated. Also, remember that the interest you earn through this scheme is taxable. Let us the historic and current interest rates of POMIS:
| Duration | Post Office Monthly Income Scheme Interest Rate |
| 1st October 2022 – 31st December 2022 | 6.70% |
| 1st July 2022 – 30th September 2022 | 6.60% |
| 1st April 2022 – 30th June 2022 | 6.60% |
| 1st April 2021 – 31st December 2021 | 6.60% |
| 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% |
Interest Rate of POMIS Vs Other Saving Schemes
| Savings Scheme | Interest Rate |
|---|---|
| Post Office Monthly Income Scheme | 6.6% |
| Post Office Recurring Deposit | 5.7% |
| Post Office Time Deposit (1, 2, 3 Years) | 5.5% |
| Post Office Time Deposit (5 Years) | 6.7% |
| National Savings Certificate (NSC) | 6.8% |
| Senior Citizen Saving Scheme (SCSS) | 7.4% |
| Public Provident Fund (PPF) | 7.1% |
How to Calculate POMIS Returns?
You can calculate the returns from a Post Office Monthly Income Scheme using a very simple formula. However, note that the interest rate that is levied on the POMIS deposit varies from a year to year.
You can calculate POMIS returns using the below formula:
POMIS Monthly Interest = Annual Investment Amount * Annual Interest Rate/12
Let us consider the below example to understand the calculation clearly.
Mr. Rishabh Jain thought of using his money in a secured investment product and he decided to put Rs. 5 Lakhs in the scheme with a prevailing interest rate of 6.60%. The monthly interest can be calculated using the above formula:
POMIS Monthly Interest = 500,000 * 6.60%/12 = Rs. 2,750
That way, Mr. Jain will earn Rs. 165,000 as interest over a period of 60 months.
Premature Withdrawal in POMIS
You can opt for early or premature withdrawal of your deposit, however that may attract penalty. If you still wish to withdraw the amount before the maturity date, submit an application in Form-2 to the Post Office. This can be done by either visiting the nearest branch or online.
Below is the table with details of penalty for premature withdrawal of POMIS:
| Time of Withdrawal | Penalty |
|---|---|
| Before one year | Withdrawal not allowed |
| Between the 2nd and 3rd year | The whole deposit after a 2% deduction from the principal amount |
| Between the 4th and 5th year | The whole deposit after a 1% deduction from the principal amount |
How to Close POMIS Account on Maturity?
The POMIS account can be closed anytime after 5 years from the date of opening the account. All you need to do is submit an application in Form-3 and the passbook to the Post Office. Once the account is closed, the depositor receives the initial amount invested along with the interest earned throughout.
In case, the depositor passes away, nominees of the scheme will receive the principal and interest amount.
Difference between POMIS and Other Monthly Income Plans
POMIS is one of the monthly income savings schemes that you can use for building a desired corpus. Other similar schemes are monthly income plans from mutual funds, and bank fixed deposits with monthly interest pay-out.
Let us understand how POMIS is different from Mutual Funds and Fixed Deposit:
| POMIS | Mutual Funds | Fixed Deposit | |
| Rate of Return | Fixed-rate of interest payable throughout the tenure | The variable rate depends on market performance | Fixed-rate of interest payable throughout the tenure |
| Safety of Return | Guaranteed returns | Returns depend on fund performance | Assured returns |
| Investment Limit | Max Rs. 4.5 lakhs per depositor | No limit | No limit |
| TDS | Not applicable | Not applicable | Applicable |
| Investment Risk | Nil | Moderate risk | Nil |
| Premature Withdrawal | Allowed after 1 year with a penalty | The minimum lock-in period of 3 years for SIP | Premature withdrawal allowed with penalty |
| Who can Invest? | Resident Indians | Both residents and NRIs | Both residents and NRIs |
Post Office MIS Scheme FAQs
Yes, you can change a single POMIS account to a joint account and a joint to a single account.
The minimum deposit amount in POMIS is Rs 1000. You need to maintain a balance in multiples of 1000. As all the interest is paid out monthly only your deposit money remains in the balance.
Yes, POMIS has the nomination facility. You can nominate while opening the account or afterwards. You can also change the nomination anytime during the investment period.
Bonus payments are no longer a part of the POMIS scheme since FY10 or the year 2011.
POMIS scheme requires you to maintain the deposit for at least one year before a premature withdrawal can be allowed.
The nominee can furnish the death certificate along with his/her identification documents. In the absence of a nominee, a legal heir can submit relevant documents to claim the amount.
Yes, you can transfer your POMIS account from one post office to another.
Yes, you can reinvest your accumulated funds in POMIS. Just make sure that your total POMIS deposit should not exceed Rs 4.5 lakhs.
Yes, senior citizens can also invest in the post office MIS scheme.
The funds will earn interest as per the saving account rate at the time until withdrawn.
