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

Updated on: 12 Jun, 2024 05:13 PM

The Post Office Monthly Income Scheme is a small savings scheme backed by the government. Post Office Monthly Scheme has always been a popular saving scheme for depositing and transacting money. Especially in elderly people, you can find this scheme much more commonly. In this article, we will discuss about the Post office monthly income scheme (POMIS), its interest rate, and its features.

Budget 2023 Update: The maximum deposit limit for the monthly savings scheme is enhanced from Rs.4.5 lakh to Rs.9 lakh for a single account and from Rs.9 lakh to Rs.15 lakh for a joint account.

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:

  1. 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.
  2. 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.
  3. 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.

The ITR filing for FY23-24 has started, and filing your ITR now can not only help you expedite your tax refund but also ensure timely and hassle-free ITR filing. File ITR now!

Frequently Asked Questions

Q- Which scheme is best in the post office?

The post office schemes that 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 8.20 % payable quarterly. However, only senior citizens are eligible to invest in SCSS. Hence, for individuals who are not senior citizens, the highest rate of interest is offered by Sukanya Samriddhi Yojana, which is 8.0% payable annually. Hence, the best post office scheme for senior citizens is the Senior Citizens Savings Scheme; for other individuals, it is Sukanya Samriddhi Yojana.

Q- Is the post office's 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- What maximum amount can one invest in the post office monthly income scheme?

  • The maximum investment allowed in POMIS is Rs. 9 lakh for an individual
  • In the case of joint holders (up to 3 joint holders), a maximum of Rs. 15 lakh can be invested

Q- What is the current interest rate on Post Office Monthly Scheme?

The current post office's monthly scheme interest rate is 7.4%.

Period Interest Rate
1 Jan 2024 - 31 Mar 2024 7.4%
1 Oct 2023 - 31st Dec 2023 7.4%
1 April 2023 - 30 June 2023 7.4%
1 Jan 2023 - 31 Mar 2023 7.1%
1 Oct 2022 - 31 Dec 2022 7.1%
1 April 2020 - 30 Sep 2020 6.6%
1 Jan 2020 - 31 Mar 2020 7.6%
1 Oct 2019 - 31 Dec 2019 7.6%
1 July 2019 - 30 Sep 2019 7.6%
1 Jan 2019 - 31 Mar 2019 7.7%
1 Oct 2018 - 31 Dec 2018 7.7%
1 Jan 2018 - 30 Sep 2018 7.3%

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 7.40% p.a., while other MIS’s do not provide a guaranteed return. No TDS is deducted from the 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 MISs 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.