What is the Post Office Monthly Income Scheme (POMIS)?
The Department of Posts (DoP) offers the Post Office Monthly Income Scheme (MIS), a form of term deposit account. The POMIS offers monthly interest and is ideal for people looking for a steady income stream from their assets.
The Post Office Monthly Income Scheme allows you to invest a certain amount and earn a fixed interest every month. You can invest up to Rs. 9 lakh individually or Rs.15 lakh jointly, and the investment period is 5 years. Currently, the interest rate is 7.40% for April-June 2024, payable monthly.
The minimum investment in this scheme is Rs. 1000, and an additional deposit in multiples of Rs. 1000
Maximum investment in case of:
- Single account - Rs.9 Lacs
- Joint account - Rs.15 Lacs
- Minor account - 10yrs and above 3 Lacs
Features & Benefits Of Post Office Monthly Income Scheme
The scheme comes with a maturity period of 5 years, i.e., 60 months. Given below are the features and benefits of the POMIS Scheme -
Capital Protection: The money deposited in the scheme is considered very safe, as the government supports the scheme.
Tax Efficient: This scheme is treated as tax-efficient, even if it doesn’t fall under Section 80C of the Income Tax Act, 1961, and no TDS is applicable for this scheme.
Account Ownership: The account can be opened by an individual or jointly by one or more individuals. A maximum of three adult account holders can open the account jointly. Also, if the account is opened jointly, all the holders are considered equal owners of the account. Similarly, individuals can also open multiple accounts in their name. However, the combined total deposit in all the accounts should not exceed Rs.9 lakhs.
Returns on Investment: The amount received every month will be from the month from when the first investment was made and not from the start of every month.
Deposit Amount: The account can be opened with a minimum amount of Rs.1000/-. However, if the investor wants to invest more, he can do so by investing the amount in multiples of Rs.1000.
Guaranteed Returns: This scheme provides fixed income and is not prone to market risk. It is also considered to be one of the safest schemes.
Monthly Returns: Interest can be earned monthly from the money invested in this scheme. This interest is not subject to any price rise and is also more than the other investment options that give fixed income.
Nominee: The investor also has an opportunity to nominate a beneficiary under this scheme. Thus, the beneficiaries can benefit from the amount invested and the interest received monthly from the scheme after the investor's death.
Reinvestment or Transfer: The interest received monthly can be directly taken by you from the post office, or it can also be transferred to your savings bank account. This interest can further be reinvested in SIP to get some amazing returns.
In case the investor is moving to another city, he can transfer such investment to the post office of that particular city without paying any charges for it.
Fund Movement: The funds in the POMIS can be moved to a recurring deposit (RD) account.
What is the Eligibility Criteria for POMIS Scheme?
- POMIS accounts can only be opened by resident Indians; NRIs are ineligible.
- Any adult can open a POMIS account.
- Adults can open accounts on behalf of minors aged 10 and above.
- Minors can access the funds when they reach 18 years old.
- Upon reaching adulthood, minors must apply to convert the account into their name.
How to Open Post Office Monthly Income Scheme Account?
The following is the process that an investor needs to follow to open an account in the Post Office Monthly Income Scheme:-
- Pick up the Post Office Monthly Income Scheme application form from the nearest post office.
- Submit the application form with a photocopy of your identity proof, residential proof, and 2 passport-size photographs at the post office. Also, please carry your original identity proof and residential proof for verification.
- Do get the signatures of your witness or nominee(s) on the form.
- You can make the first payment either with cash or a cheque. However, please keep in mind that if you submit a post-dated cheque, the date of such cheque will be treated as the opening date of the account.
Withdrawal Of The Deposit Amount Before The Maturity Of The Scheme
The following terms and conditions prevail in case the investor withdraws the deposit amount before the maturity period, i.e., five years:
- If the withdrawal is made before completing one year of investment, no benefits are provided. The depositor will only receive the deposited amount without any interest.
- If the withdrawal is made between 1st and 3rd year of investment, the entire deposit amount will be refunded after deducting a 2% penalty. In other words, the depositor will receive 98% of the deposited amount.
- If the withdrawal is made between the 3rd and 5th year of investment, the entire corpus amount (i.e., the deposited amount plus interest earned) will be refunded after deducting a 1% penalty. In this case, the depositor will receive 99% of the total amount accumulated till the date of withdrawal.
Who Should Invest In Post Office Monthly Income Scheme?
This scheme is specially created for investors who want to avoid facing any risks, are not interested in investing in equity-related instruments, and are searching for schemes that can give a fixed monthly income. It is particularly meant for senior citizens and those who have just stopped working and will no longer receive any salary and are set to deposit in a scheme to receive a fixed amount every month that can be used to keep up with their standard of living. Thus, the Post Office Monthly Income Scheme was introduced so that there could be a steady flow of income for a longer period.
How Does Post Office Monthly Income Scheme Work?
We can understand this with an example.
Mr. X opts to put his money in the Post Office Monthly Income Scheme. He puts in Rs. 1,00,000/- for a maturity of five years. An interest rate of 7.40% per annum will offer him Rs. 616.67/- every month. At the maturity of this scheme, he will receive all his deposit money back.
Mr. X can withdraw the money in two ways- i.e., either collect it from the post office where he deposited the amount or get it transferred to his savings account through ECS. However, money can be withdrawn every month by Mr. X. He can let all the money get collected for some months at a time and, afterward, withdraw the amount. However, it is not advisable to let the money get collected for some months as it will not give Mr. X any interest.
A new aspect was added to make the Post Office Monthly Income Scheme more successful. The investor could club his Post Office Monthly Income Scheme with a recurring deposit. In this new feature, the interest earned through the Post Office Monthly Income Scheme can be further invested in recurring deposits, which would have allowed an investor to make more money.
Currently, the interest rate on the amount deposited in this scheme is 7.40% per annum. Also, the interest amount, which will be receivable monthly, can be further invested in recurring deposits.
Thus, the main motive behind the investors investing in the Post Office Monthly Income Scheme is that they are guaranteed to get a fixed amount of money in the form of interest every month, which will be treated as a regular income for them. Although it has no tax incentives, small investors still prefer it as an investment option. In case you feel that this scheme is worth investing in, consider it at the earliest and invest some money in it.
If you want to learn about more tax-saving investment options, contact our tax experts, who can help you find the best investment opportunities to maximize tax savings.
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