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.

Age Conditions                 

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.

Investment Conditions

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.

Interest Rate

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.

Interest Rates on Post Office Schemes August 2018

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 1^st 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.

 Nomination Facility

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.

Exit Option

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.

Post Office is still one of the largest banking service providers in the country. It is also associated with greater credibility than other investment avenues as it is governed by the Ministry of Finance.

If one is looking for a safe investment option that will earn decent returns, then one should consider one of the post office schemes.

The Post Office Monthly Income Scheme (POMIS) is not well-known among investors in the urban parts of the country. The population in urban India looks to invest in fixed deposits and other debt options for generating monthly incomes or even to just park their money. But the monthly income scheme offered by the Indian postal service, although lesser-known, offers many benefits to the investor.

It provides customers the following benefits:-

• It keeps the capital intact.
• It ensures that the customer receives a fixed monthly income.
• It yields better returns than debt-based instruments.

Interest can be drawn through auto credit into savings account standing at the same post office.

An individual can open the account by cash/cheque. In case of cheque, the date of realization in Government account will be considered as the date of opening an account.

Joint account can be opened by two or three adults. All joint account holders have equal share in each joint account. Single account can be converted into Joint. And Vice Versa.

A bonus of 5% on principal amount is admissible on maturity for MIS accounts opened on or after 8^th December 2007 and up to 30^th November 2011. No bonus is payable on the deposits made on or after 1^st December 2011.

Post Office Monthly Income Scheme Suitablility

• For:-

Investors who are looking to earn assured income from their savings.

• Not for:-

Investors who are not looking for regular income. That is investors who don’t need regular income.

Guaranteed Returns

Post Office Monthly Income Scheme (POMIS) investment scheme guarantees investors returns. You earn income in the form of interest which is payable monthly. These returns are called as fixed monthly income.

The returns are higher compared to other fixed income investments like FD.

Interest Rates on Post Office Schemes August 2018

From 1^st January 2018, interest rates on POMIS are 7.3% per annum.

Taxation

Post office MIS does not offer any tax benefits. It doesn’t fall under Section 80C. Thus, the income is subject to taxation. But it has no TDS either.

The monthly interest payout is also taxable income recorded under ‘income from other sources’. But, there is no TDS on the interest amount either.

The amount that is invested in POMIS is not eligible for tax rebates under Section 80C of the Income Tax Act, 1961.

Withdrawal

Post office monthly income scheme account allows premature withdrawal after one year.

If the investor is required to withdraw the money before 5 years, the following will be payable:-

• Deposit withdrawal within 1 year – The customer receives no benefits.
• Deposit withdrawal between 1 and 3 years – The customer receives the entire deposit after a nominal deduction of 2% as penalty.
• Deposit withdrawal after 3 years – The customer receives the entire deposit after a nominal deduction of 1% as penalty.

If the deposit and the interest are not withdrawn after 5 years, then that account will earn a simple interest (as per the post office savings account interest rate) up to 2 years. After that, the final amount will be kept idle, until withdrawn.

 Account Portability

Portability of the account from one post office to another is available. A post office monthly income scheme account can be transferred from one post office to another.

Also, customers are free to open any number of time deposit accounts in any Post Office of their choice. POMIS has a flexible approach.

In the event of shifting from one city to another, one can easily transfer the investment to the post office in the current city at no extra cost.

Alternative Investments

If an investor doesn’t want to invest in post office time deposit, it has the following alternatives available, which have same characteristics:-

• SWP from Debt-Oriented mutual fund
• Annuity Plan of a life insurance company
• Senior Citizens Savings Scheme [For Senior Citizens Only]
• Pradhan Mantri Vaya Vandana Yojana [For Senior Citizens Only]