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Post Office Monthly Income Scheme (POMIS): Interest Rate & Features

Updated on: 19 Apr, 2022 06:52 PM

The Post Office, like any other nationalised bank, has long been a trusted place for money deposits and transactions. This is particularly true for the elderly. Branches of the Post Office across the country offer a variety of savings plans.
One such scheme is the Post Office Monthly Income Scheme, which allows you to invest a set amount and get a monthly fixed interest payment. You can invest in this at any post office, as the name implies.

What is the Post Office Monthly Income Scheme?

India Post offers the Post Office Monthly Income Scheme (MIS), which is a form of term deposit account. The MIS scheme offers monthly interest and is ideal for people looking for a steady stream of income from their assets. The Department of Posts (DoP), popularly known as India Post, offers this type of investment scheme. Those interested in investing in monthly income plans offered by the Post Office can do so at any post office in their area. The interest rate on the Post Office Monthly Income Scheme is 6.6 percent per annum as of May 1, 2021.

Features & Benefits Of Post Office Monthly Income Scheme

The scheme became active on 1st December 2011 with a maturity period of 5 years i.e., 60 months. The scheme is thus treated as active from the date when the investor opens the account.

  • Capital Protection: The money that is deposited in the scheme is considered to be very safe, as the scheme is supported by the government.
  • 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 Tax Deducted at Source is available for this scheme.
  • Account Ownership: The account can be either opened by an individual or jointly. A maximum of three account holders who are adults can open the account jointly. Also, if the account is opened jointly, all the holders are considered to be equal owners of the account.
  • Returns on Investment: The amount received every month will be from the month from when the first investment was made and not from the starting of every month.
  • Deposit Amount: The account can be opened with a minimum amount of Rs.1,500/-. However, in case if the investor wants to invest more, he can do so by investing the amount in multiples of Rs.1,500.
  • Guaranteed Returns: This scheme provides fixed income and it is not much prone to market risk. It is also considered to be one of the safest schemes.
  • Monthly Returns: Interest can be earned every month 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 which give fixed income.
  • Nominee: The investor also has an opportunity to nominate a beneficiary under this scheme. Thus, the beneficiaries can get the benefits of the amount invested, and the interest which is received every month from the scheme after the death of the investor.
  • Reinvestment or Transfer: The interest which is 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 invested in SIP to get some amazing returns.
    In case, if the investor is moving to another city, then he can transfer such investment to the post office of that particular city without paying any money for it.
  • Multiple Accounts: It is possible for an account holder to open as many accounts as he wants. However, the total investment in this scheme should not be more than Rs. 4. 5 lacs in all the accounts at the same time.
  • Fund Movement: The amount deposited in this scheme can be moved to a recurring deposit in a post office. This feature of the recurring deposit is newly introduced.
    The account can be opened only by an Indian resident. Non- resident Indians cannot open an account in this scheme.
    An account can be opened in the name of your child provided he is 10 or above years of age.
    When the minor reaches the age of 18 years, they can get the amount which was deposited in this scheme. In such cases, the investment amount cannot be more than Rs. 3 lacs. Once a minor reaches 18 years of age, he has to apply for transferring the account in his name.
    Initially, a bonus of 5% was distributed on the amount of investment. However, after 1st December 2011, no bonus is being declared to any accounts opened.
    This scheme does not offer any tax refund on the investments made or on the amount which is received at the end of the investment’s tenure.

Opening An Account In Post Office Monthly Income Scheme

It is not at all tough to open an account in the Post Office Monthly Income Scheme.

The following is the process that an investor needs to follow for opening an account in the Post Office Monthly Income Scheme:

  • In case, if you still have not opened a post office savings account then please do so.
  • From the nearest post office, pick up the Post Office Monthly Income Scheme application form.
  • 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 cheque. However, please do keep in mind that if you are submitting a post-dated cheque, then 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, if the investor withdraws the deposit amount before the maturity period i.e. 5 years:

  • The investor can get a 2% discount on the deposit amount, in case if he withdraws the deposit amount within a span of three years from the date of opening of the account.
  • The investor can get a 1% discount on the deposit amount, in case if he withdraws the deposit amount after three years from the date of opening of the account.

Who Should Invest In Post Office Monthly Income Scheme

This scheme is specially created for investors who do not want to face any risks, who are not interested in investing in equity -related instruments, and who are searching for such scheme which can give a fixed monthly income. It is particularly meant for senior citizens, and for 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, basically, the Post Office Monthly Income Scheme was introduced so that there can be a steady flow of income for a longer period.

How Does Post Office Monthly Income Scheme Work

Mr X opts to put his money in Post Office Monthly Income Scheme. He puts in Rs. 1, 00,000/- for maturity of five years. An interest rate of 8.5% per annum will offer him Rs. 708/- 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 can get it transferred to his savings account through ECS. However, money can be actually withdrawn every month by Mr X. Mr X can let all the money get collected for some months at a time and afterwards, 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 further added to make the Post Office Monthly Income Scheme more successful. The investor would have an opportunity to club his Post Office Monthly Income Scheme with a recurring deposit. In this new feature, the interest earned through Post Office Monthly Income Scheme can be further invested in recurring deposits which would have allowed an investor to make more money.
Currently, the rate of interest on the amount deposited in this scheme is 7.30% per annum. Also, the interest amount which will be receivable every month can be further invested in recurring deposits at the rate of 7.30% per annum.
Thus, the main motive behind the investors investing in 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 doesn’t have any tax incentives, it is still preferred as an investment option by small investors. In case if you feel that this scheme is worth investing in. then do consider it at the earliest and invest some money in the scheme.

Frequently Asked Questions

Q- Which scheme is best in the post office?

The post office schemes which are eligible for deduction under Section 80C are 5-year Time Deposit, Public Provident Fund, Sukanya Samriddhi Yojana, National Savings Certificate and senior Citizen Savings Scheme (SCSS). Out of them the highest rate of interest is offered by SCSS of 8.6%. However, only senior citizens are eligible for investing in SCSS. Hence, for individuals who are not senior citizens, the highest rate of interest is offered by Sukanya Samriddhi Yojana. Hence, the best post office scheme for senior citizens is Senior Citizens Savings Scheme and for other individuals, it is Sukanya Samriddhi Yojana.

Q- Is the post office monthly income scheme tax-free?

The amount invested in the post office monthly income scheme is not tax-deductible. In other words, investment in POMIS doesn't offer any tax benefits. Further, interest earned on the amount invested is taxable.

Q- Which is the best monthly income scheme?

The best schemes in India for regular monthly income are corporate deposits, post office monthly income schemes, government bonds and senior citizens savings scheme.

Q- How does the monthly income scheme work?

The Post Office Monthly Income Scheme is a small savings scheme offered by Indian Post Offices that allows investors to save a regular amount each month. Interest is added to the investment at an applicable rate each month.

Q- How is POMIS different from other monthly investment schemes?

POMIS is different from other monthly investment schemes in many ways. It provides a guaranteed return at 7.7% p.a. while other MIS do not provide a guaranteed return. No TDS is deducted from interest payout of POMIS, while in the case of other MIS it is deducted. It is a low-risk investment suitable for small investors while other MIS are generally high-risk investments.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.