Post Office Monthly Income Scheme (POMIS) is offered by Post Offices among other banking products, services and Post Office Schemes, under the governance of the Finance Ministry.
Only a resident Indian is eligible open a Post Office Monthly Income Scheme (POMIS) account. NRI’s cannot enjoy the benefits of this scheme. POMIS has the flexibility and reliability that calls to risk-averse investors, despite limited tax benefits.
The process of investing in Post Office Monthly Income Scheme (POMIS) can be done easily. It requires minimal documentation. The investors are required to submit a copy of their identity proof, an address proof, and some passport size photographs. The ID proof can be the passport, ration card, PAN card, or voter identity card.
Capital protection is its primary objective. The scheme is backed by the Government of India. Thus, the capital in the POMIS is completely protected. The POMIS is not inflation protected. This means that the returns from these deposits are affected by inflation rates.
The monthly interest can be collected directly from the post office or transfer it to the savings account. As a fixed income scheme, the money you invested is not subject to market risks. It is a quite safe scheme.
No age limit is mentioned for opening a POMIS account. An account can also be opened in the name of a minor. A minor of 10 years and above age can open and manage the account.
They can avail this fund when they become 18. After attaining majority she/ he has to apply for conversion of the account in her/ his name.
But, for minors the investment cannot exceed Rs. 3 lakhs.
Post office recurring deposit has some investment conditions. You can start with a nominal initial investment of Rs. 1500. As per your affordability, you can multiply this amount.
You can open more than one account in your name. But the total deposit amount in all of them together cannot exceed:-
- 4.5 lakhs for an individual
- 9 lakhs for a joint account
You can invest a onetime fixed sum and start earning monthly. The maximum amount that a minor can invest in POMIS is Rs.3 lakhs.
You earn income in the form of interest every month. The interest rates are higher compared to other fixed income investments like FD.
There are 3 ways in which the interest earned can be availed:-
- The interest will be automatically credited to the savings account with the post office.
- The depositor can request for interest withdrawal every month. He/she will receive the amount either as cash or through a cheque, as required.
- The interest can also be availed through post-dated cheques. The validity of the cheque will be 3 months from the date of issuance. But, this facility can only be availed if the cheque amount is more than Rs.100. If the post-dated cheque option is chosen for availing interest, the account holder receives the final amount after 5 years through the cheque only.
Currently interest rates on POMIS are 7.3% per annum payable monthly.
Tenure of Deposit
Tenure of deposit is the time duration for which an investor deposits/invests his/her funds. The funds remain locked-in for this tenure (early withdrawal subject to conditions).
From 1st December 2011 the lock-in period for Post Office Monthly Income Scheme is 5 years.
One may reinvest the corpus post maturity in the same scheme for another 5 years to get double benefits.
Post office monthly income scheme provides nomination facility. Nomination is a facility that enables deposit account holders to nominate an individual, who can claim the proceeds of the deposit accounts or contents of the safe deposit lockers, post the death of the original depositors.
Nomination facility is available at the time of opening and also after opening of account. The investor can nominate a beneficiary (a family member) so that they can claim the benefits and corpus if the investor passes away.
You will receive the payout one month from making the first investment, and not the beginning of every month. The investor can move the funds to a recurring deposit.
POMIS allows premature withdrawal after one year but before 3 years at a nominal deduction of 2% as penalty and the remainder is paid to you. After 3 years at a nominal deduction of 1% as penalty and the remainder is paid to you. The investors don’t get any benefits if they withdraw the deposit before 1 year.