Post Office Monthly Income Scheme: Features & Interest Rate

2025-02-04

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Managing expenses becomes easier when you have a regular income to rely on. While generally savings plans offer returns on a quarterly, half-yearly, or annual basis, a monthly savings plan provides you with a financial cushion. Monthly income plans like the Post Office Monthly Income Scheme (POMIS) are a practical solution for steady returns.

Let’s understand how this smart step brings financial self-sufficiency without added complexity.

Key Takeaways

POMIS offers a guaranteed monthly income backed by the Government of India, making it ideal for conservative investors.
The interest rate is fixed for the entire five-year term, ensuring stable returns.
You can invest as low as ₹1,000 and up to ₹9 lakh in a single account or ₹15 lakh jointly.
No market risk makes it perfect for retirees or those seeking predictable income.
Interest is credited monthly but does not earn compound interest if left unclaimed.

What is POMIS?

Post Office Monthly Income Scheme (POMIS) is a government-backed savings scheme that gives investors guaranteed returns at an interest rate of 7.4% per annum. The account can be opened by an individual for themselves or jointly. The account can be opened by a guardian or a 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.

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What are the Key Features of the Post Office Monthly Income Scheme (POMIS)?

Being a government-backed investment, the returns for the 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 the Post Office Monthly Income Scheme:

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.
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.
Minimum Deposit Amount: The minimum amount for opening a post office MIS account is ₹ 1000. In addition to this, the amount should be a multiple of 1000s.
Maximum Deposit Amount: The maximum amount that single account holders can deposit in the post office MIS account is ₹ 9 lakh. For joint accounts, this amount goes up to ₹ 15 lakh.
Lock-in Period: You cannot withdraw the entire amount from your POMIS account before the maturity period of five years is over.
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

No Tax Benefits: Unlike some other savings schemes, the post office monthly income scheme does not offer any tax benefits. However, most people do not consider this a demerit because of its various other merits. If you need to buy a savings plan with tax benefits, you can browse through the life insurance plans offered by Canara HSBC Life Insurance.
Joint Account Facility: You can open a Post Office Monthly Income Scheme account as a joint account with up to 3 people.
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.
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.
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.
Guaranteed Regular Income: The post office monthly income scheme is a low-risk and government-backed savings scheme. So, you receive guaranteed income regularly. The returns are significant for a short-term investment without risk.

You can also invest in other savings and investment plans like iSelect Guaranteed Future by Canara HSBC Life Insurance, which offers guaranteed maturity benefits along with a life cover.

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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.
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.

What are the Benefits of the 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:

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.
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.
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.
Hold Jointly with Spouse: You can only deposit up to ₹9 lakhs in the individually held POMIS account. If you hold the account jointly with your spouse or parents, the deposit amount will increase to ₹ 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, requiring minimal documentation. The person may choose to go ahead with an individual account or a joint account. Listed below is the minimum and maximum investment that are allowed in a POMIS:

Type of Account	Minimum Investment Amount	Maximum Investment Amount
Single Account	₹ 1000	₹ 9,00,000
Joint Account	₹ 1000	₹ 15,00,000
Minor Account	₹ 1000	₹ 3,00,000

What are the Eligibility Criteria for Opening a POMIS Account?

POMIS was designed for investors who have a 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.
The age of minor account holder should be 10 years or above.
A 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.

What are the Documents Required to Open a POMIS Account?

A POMIS account can be opened with a few very basic 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.

What is the Step-By-Step process to Open a POMIS Account?

Currently, there is no provision for 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 realisation will be the account opening date.

Note: You can nominate or change a nomination in the POMIS account after opening as well.

What are the Interest Rates on a Post Office Monthly Income Scheme Deposit?

The interest rate on POMIS deposits is fixed by the 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 April 2023 – 30th September 2025	7.40%
1st January 2023 – 31st March 2023	7.10%
1st October 2022 – 31st December 2022	6.70%
1st April 2020 – 30th September 2022	6.60%
1st July 2019 – 31st March 2020	7.30%
1st October 2018 – 30th June 2019	7.70%
1st January 2018 – 30th September 2018	7.30%
1st July 2017 – 31st December 2017	7.50%
1st April 2017 – 30th June 2017	7.60%

Interest Rate of POMIS Vs Other Saving Schemes

Savings Scheme	Interest Rate
Post Office Monthly Income Scheme	7.40%
Post Office Recurring Deposit	6.70%
Post Office Time Deposit (1, 2, 3 Years)	6.7% to 7.5%
Post Office Time Deposit (5 Years)	6.50%
National Savings Certificate (NSC)	7.7%
Senior Citizen Saving Scheme (SCSS)	8.20%
Public Provident Fund (PPF)	7.10%

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 year to year.

You can calculate POMIS returns using the following formula:

POMIS Monthly Interest = Annual Investment Amount * Annual Interest Rate/12

Let us consider the following example to understand the calculation clearly.

Mr. Rishabh Jain thought of using his money in a secured investment product and he decided to put ₹ 5 Lakhs in the scheme with a prevailing interest rate of 7.4%. The monthly interest can be calculated using the above formula:

POMIS Monthly Interest = 500,000 * 7.40%/12 = Rs. 3,083.3

That way, Mr. Jain will earn ₹ 1,84,998 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 a 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 the 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 a 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, the nominees of the scheme will receive the principal and interest amount.

What is the 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 payout.

Let us understand how POMIS is different from Mutual Funds and Fixed Deposits:

	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 ₹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 a penalty
Who can Invest?	Resident Indians	Both residents and NRIs	Both residents and NRIs

Conclusion

The Post Office Monthly Income Scheme is a time-tested savings instrument that offers guaranteed monthly returns and unmatched financial stability. It is best suited for individuals with a low-risk appetite who want predictable income without exposure to market volatility. While its simplicity, capital safety, and assured income make it a smart choice, by pairing it with growth-oriented options like ULIPs, one can enjoy both stability and long-term wealth creation.

You can explore and even purchase ULIP plans by Canara HSBC Life Insurance, both offline and online. With online support channels and 15,700 partnered branches available, we offer assistance all the way along. Lastly, our 99.31% claim settlement ratio ensures that your future and the financial security of your loved ones is safe and in reliable hands.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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