What is Post Office Monthly Income Scheme?
Equity funds, depository funds, and SIP are the most sought-after investment options in India. But for someone with lower risk tolerance, government-authorized policies like employee provident funds, public provident funds, and post office depository schemes are the safer routes to earning returns on investments or parking the surplus income.
The post office offers multiple depository plans that promise decent returns on investments like Post Office Savings Account, Post Office Monthly Income Scheme (POMIS), and Post Office Recurring Deposit. However, POMIS is the most popular depository service of the Indian Post Office since the POMIS interest rate is one of the highest at 6.7%.
With POMIS, investors deposit a specific amount every month. The interest is generated at the specified rate every month. This postal MIS scheme might not be the first choice for seasoned investors owing to the capped returns, but it has several benefits. To learn more about the POMIS scheme, read on.
Key Features of the Postal MIS Scheme
Although Post Office investment options are not much popular in metropolitan areas, they are the most credible investment avenues backed by the Indian Ministry of Finance.
POMIS is perhaps the best investment option offered by the post office. Let us look at some of the crucial features of the Post Office Monthly Income Scheme.
- Monthly Returns- As the name indicates, the Post Office MIS scheme is a monthly investment option. The biggest perk of this investment is that interest is added monthly.
So, an investor can reap the returns on their investment much like a monthly salary. To avail of this feature, you have to opt for auto-withdrawal. It will directly transfer the monthly interest to your bank account.
- Lock-in Period- POMIS comes with a lock-in period of 5 years. Simply put, an investor cannot withdraw the principal deposited within five years from the investment date.
- Joint Account- Post Office MIS scheme allows up to three people to open a POMIS account jointly. For POMIS, the maximum investment limit goes up to INR 9 lakhs.
- Transferrable Scheme- It refers to the ability of investors to transfer the POMIS scheme account from one city to another within India if the investor is moving to a new place. Thus, these schemes are tailor-made for government employees or people with transferable jobs.
- Minor Account- Are you looking for safe investment options to secure your child's future? Look no further! The Post Office Monthly Income Scheme is a government-backed investment option with guaranteed returns that you can open for your child above ten years of age. The child can withdraw the amount only after they turn 18.
- Minimum Investment- The minimum investment amount for the POMIS scheme is INR 1000.
- Tax Benefits- There are no tax advantages investors can enjoy on the interest earned from their Post Office MIS scheme.
How Does the Post Office Monthly Income Scheme Function?
Once an investor has opened their POMIS account, they can deposit INR 1000 to INR 4.5 lakh for five years. For joint account holders, the upper cap is INR 9 lakh. For example, Mr. Rogers created his account and deposited INR 2 lakh at a fixed rate of 6.7% per annum.
This deposit will generate a monthly interest of INR 1116.66. Upon maturity, i.e., after five years, Mr. Rogers can initially withdraw the amount he deposited. Now for the interest, he can opt for the monthly withdrawal. Otherwise, he can withdraw the entire interest accrued through the five years at the end of the term, which would be INR 67,000 in this case.
Of course, for POMIS, a monthly auto-withdrawal is a better deal since the accumulated interest does not generate further interest. Even if you do not need the monthly interest, it is wise to invest that interest rather than parking it somewhere it cannot grow. Since inflation is detrimental to stagnant assets, the accumulated interest will be of less value after five years.
You could link a recurring account with your postal MIS scheme. It will ensure that the interest earned from POMIS will get invested in a recurring deposit account every month. This way, you will not only earn from the postal MIS scheme but create a top-up returns opportunity on the interest earned.
POMIS Account Opening Procedure
The Post Office MIS scheme opening procedure is straightforward and hassle-free:
- The first step is to have a Post Office Savings Account. If you do not have one, create a savings account before initiating the POMIS account procedure.
- Submit copies of the required documents for the account creation process.
- Submit the original documents to the post office for verification.
- Assign a nominee and complete the process by signing the forms yourself and getting your beneficiary to sign.
- Deposit the amount through a cheque. The date on the cheque will be used as the account opening date.
You are all set! You will start earning interest within one month of opening the account.
Another perk of POMIS is that you do not need a bouquet of documents to open an account. With a handful of documentation, you can get started on this depository service offered by the Indian Post Office.
- Identity Proof- This could be your passport, PAN card, Aadhaar card, or Voter ID card.
- Address Proof- You need residential proof issued by the government or utility bills like an electricity bill.
- Photographs- Passport-size photographs are needed.
Eligibility of MIS in Post Office
Not everyone can open a POMIS account and start earning. Here is the eligibility criterion to know if you can reap the benefits of this monthly scheme.
- Only Indian residents can open a POMIS account. NRIs are not eligible to partake in this scheme.
- Anyone above 18 years of age can apply for POMIS.
- Parents or guardians can create a POMIS account for minors above ten years. Once the child turns 18, they can withdraw the fund.
Who Should Invest in POMIS?
POMIS is one of the highest interest-earning schemes devised by the Indian Post Office. It does not negate the fact that there are several other investment options, like mutual funds or equity, that can fetch higher returns than the 6.7%. Of course, these high-interest options come with market risks.
So, POMIS is ideal for investors who do not care for steep returns but want their money to grow steadily in a secure environment. Hence, this monthly scheme would be a great investment avenue for senior citizens or retired officials who are no longer cashing a fixed salary every month.
This policy is also ideal for investors who want to invest in a one-time payment scheme rather than engaging in monthly premiums like recurring accounts.
The lock-in period is moderately long for this policy. So, only people with surplus income or who will not need the deposit amount in recent years can go with this policy.
Maximum Investment Amount in Post Office Mis
An investor is entitled to deposit a maximum of INR 4.5 lakh in their POMIS account. Even if an investor has multiple accounts across different post offices, the aggregate of the deposits of all the Post Office Monthly Income Scheme accounts cannot exceed the INR 4.5 lakh benchmark.
For joint accounts, the upper limit is INR 9 lakhs. The maximum investment amount for minor Post Office Monthly Income Scheme accounts is INR 3 lakh.
Early Withdrawal Penalty
Since the lock-in period of POMIS is five years, an investor is not allowed to withdraw the deposit within five years of depositing the fund. But in an emergency, you can opt for early withdrawal of the investment at the cost of a penalty.
If an investor withdraws the deposit after one year and within three years of opening the MIS scheme, he will be obliged to pay a penalty of 2% from the principal. However, if the investor closes their account after three years of opening the deposit account, a penalty charge of 1% will be deducted from the principal.
Benefits of the Post Office Monthly Income Scheme
Still undecided on which Post Office Savings Scheme to go for? Here is a list of benefits of applying to POMIS:
- Government-Backed Investment- This investment opportunity is not subject to market risk. Additionally, this scheme is backed by the Ministry of Finance. Hence, you will never lose the corpus you deposited.
- Decent Returns- Although the investment returns for this policy are not sky-high, the returns are decent enough for low-risk appetite investors.
- Multiple Accounts- An investor can own several POMIS accounts if the deposit aggregate is within INR 4.5 lakh.
- Equal Shares- Each account holder will own equal shares for a joint account.
- Monthly Returns- POMIS is one of the few investment opportunities that accrue a monthly return that you can cash in.
- Continued Earnings- If you do not withdraw the invested corpus after maturity, you will earn a steady interest at a similar rate to that of a Post Office Savings Account for up to 2 years.
- Re-investment Facilities- You could choose to invest the interest earned in high profit-yielding investment options like equity. This way, the deposited corpus is safe and generates a steady return while you enjoy higher returns on the interest you earn. It is a win-win situation.However, these high-return-yielding investments come with a fair share of risk. Combining high-profit return investments and steady but safe return opportunities is the perfect way to diversify your portfolio. It ensures you enjoy good returns by engaging in high- and limited-risk securities.
POMIS Vs Other Schemes of the Post Office
The Post Office might not be the first choice for banking facilities, especially in urban areas. Yet, there is no denying that Indian Post Offices are still one of our country's most frequently used banking services. The Post Office makes financial services like a savings account or a savings scheme accessible in rural areas where corporate banks have not opened business.
However, the Post Office Monthly Income Scheme is not the only available savings scheme offered by Indian Post Offices. There are numerous other saving opportunities from post offices, all backed by the government of India. Comparing the benefits of several investment securities before you zero in on one of them is essential.
Here is a tabular representation exploring the benefits of some of the most common saving opportunities offered by the Indian Post Offices at a glance.
|Savings Policy||Rate of Interest||Is TDS Deducted?|
|Post Office Monthly Income Scheme (POMIS)||6.7%||No|
|Post Office Recurring Deposit (RD)||5.8%||No|
|Post Office Time Deposit (for 1,2,3 year respectively)||5.5%, 5.7%, and 5.8%||No|
|Post Office Time Deposit (five years)||6.7%||Yes|
|Senior Citizen Saving Scheme||7.6%||Yes|
|Public Provident Fund (PPF)||7.1%||Yes|
|National Savings Certificate||6.8%||Yes|
Now that you are familiar with the interest rates of some of the popular saving schemes of the Indian Post Office, we hope you will make an informed decision about choosing your ideal saving channels.
POMIS Vs Bank FD Vs NSC
Now let us explore some varied profit-yielding investment securities. In this section, we will discuss the Post Office Monthly Income Scheme (POMIS), Bank Fixed Deposit (FD), and National Savings Certificate (NSC) in detail.
|Features||POMIS||Bank Fixed Deposit (FD)||National Savings Certificate (NSC)|
|Rate of Interest||Fixed at 6.7%||Varies between 5.1% to 7.25%||Fixed at 6.8%|
|Returns||Guaranteed returns||Assured returns||Assured|
|TDS||No TDS is deducted||TDS is deducted||No TDS is deducted|
|Investment Limit||There is an investment limit. INR 4.5 lakh for individual accounts and INR 9 lakh for joint accounts.||No upper limit to deposit corpus is available.||No maximum investment limit is applicable in NSC.|
|Risk||No Risk||No Risk||No to low risk|
|Early Withdrawal Penalty||Premature withdrawal is subject to a penalty||Early withdrawal is subject to a penalty||Early withdrawal is applicable in special situations|
|Tax Benefits||No Tax benefits||Tax benefits under Section 80C of the Income Tax Act.||Tax rebate available under Section 80C.|
|Maturity Period||Five years||Varies from 7 days to 10 years.||There are two options: either five years or ten years.|
Comparison with Other Monthly Income Schemes?
|POMIS||Mutual Funds Monthly Income Scheme||Insurance Monthly Income Scheme|
|Fixed monthly income with 6.8% interest||A debt-biased mutual fund. Debt:equity= 80:20||Earns monthly annuities|
|Guaranteed monthly income||Income is subject to market performance||Guaranteed monthly income|
|Suitable for low-risk appetite investors||Suitable for moderate risk appetite investors.||Appropriate for investors who want to enjoy both insurance and investment benefits|
|There is an upper limit on investment||No upper limit||No upper limit|
How can a nominee or heir access the funds from the POMIS account of a deceased investor?
The nominee or heir of an investor is legally bound to close the POMIS account of the deceased. They must submit the death certificate of the depositor to close the account. The nominee cannot continue with the MIS scheme upon the account holder's death. The amount invested and interest earned up to the previous month is credited to the nominee.
Is there a feature to nominate a beneficiary available in the Postal MIS Scheme?
Like any other depository scheme, POMIS too comes with the feature of choosing a nominee. The nominee is entitled to get the deposited amount, along with interest accrued, in case of the untimely demise of the account holder.
Is there any Post Office Monthly Income Scheme for senior citizens?
POMIS schemes are a great investment avenue for senior citizens since the returns are guaranteed, and the post office (a government institution) will never unscrupulously forfeit the deposit. High-risk investment options are not ideal for retired people since if they lose their savings, there is limited opportunity for them to salvage it without a consistent paycheck.
Can I prematurely withdraw money from my POMIS account?
Premature withdrawals from POMIS accounts are permissible after a year after opening the account. Of course, the investor has to bear a penalty for withdrawing the deposit before the maturity date.
Is POMIS subject to TDS?
There is no TDS applicable to the postal MIS scheme. But the interests earned are taxable.