Post Office Monthly Income Scheme
Post Office offers POMIS among a host of banking products and services, under the purview of the Finance Ministry. Hence, it is highly reliable. It is a low-risk MIS and generates a steady income.
You can invest up to Rs.4.5 lakh individually or Rs. 9 lakh jointly, and the investment period is 5 years. Capital protection is its primary objective. For the quarter ending 30 September 2021, the interest rate is 6.6% per annum, payable monthly.
For instance, Mr Sharma has invested Rs.4.5 lakh in the post office monthly investment scheme for 5 years. As mentioned above, the interest rate is 6.6% p.a. His monthly income will be Rs.2,475 for that period. Post-maturity, he can withdraw his deposit, Rs.4.5 lakh, either from any post office or get it transferred to his savings account via Electronic Clearance Service. Alternatively, the account can be renewed.
Features & Benefits of Post Office Monthly Income Scheme
- Capital protection: Your money is safe until maturity as this is a government-backed scheme.
- Tenure: The lock-in period for Post Office MIS is 5 years. You can withdraw the invested amount when the scheme matures or reinvest it.
- Low-risk investment: As a fixed income scheme, the money you invested is not subject to market risks and is quite safe.
- Affordable deposit amount: You can start with a nominal initial investment of Rs.1,000. As per your affordability, you can invest in multiples of this amount.
- Guaranteed returns: You earn income in the form of interest every month. The returns are not inflation-beating but are higher compared to other fixed-income investments like FD.
- Tax-efficiency: Your investment is not covered under Section 80C; TDS is not applicable either.
- Payout: You will receive the payout after one month from making the first investment, and not the beginning of every month.
- Multiple account ownership: You can open more than one account in your name. But the total deposit amount cannot exceed Rs.4.5 lakh in all of them together.
- Joint account: You can open a joint account with 2 or 3 people. In this case, an aggregate sum of up to Rs.9 lakh can be invested in this account.
- Fund movement: The investor can move the funds to a recurring deposit (RD) account, which is a feature Post Office has added recently.
- Nominee: The investor can nominate a beneficiary (a family member) so that they can claim the benefits and corpus if the investor passes away during the account’s term.
- Ease of money/interest transaction: You may collect the monthly interest directly from the post office or get it transferred automatically to your savings account. Reinvesting the interest in a SIP is also a lucrative option.
- Reinvestment: You may reinvest the corpus post maturity in the same scheme for another block of 5 years to continue earning benefits.
Eligibility criteria to open a POMIS account
- Only a resident Indian can open a POMIS account.
- NRIs cannot enjoy the benefits of this scheme.
- Any adult can open an account.
- You can open an account on the behalf of a minor who is aged 10 years and above. They can avail the fund when they become 18 years old.
- A minor, after attaining majority, has to apply for conversion of the account in his name.
Account Type | Maximum Deposit Amount Allowed |
Single Account | Rs.4.5 lakh |
Joint Account (2 or 3 adults) | Rs.9 lakh |
How to open a POMIS Account
Opening a POMIS account is not as tedious as you think. Instead of imagining long queues and even longer paperwork, please take a look at the step-by-step procedure.
- Open a post office savings account, if you haven’t already.
- Collect a POMIS application form from your Post Office.
- Submit the duly filled form along with a photocopy of your ID and residential proofs and 2 passport-size photos at the Post Office. Do carry the originals for verification.
- Get the signatures of your witness or nominee(s) on the form.
- Make the initial deposit via cash or cheque. In the case of a post-dated cheque, the date on the cheque will be the account opening date.
- Once the processing is done, the executive at Post Office will provide you with the details of your newly opened account.
Consequences of early withdrawal
Time of POMIS withdrawal | Outcomes of premature withdrawal |
Before completing one year | Zero benefits |
Between 1st and 3rd year | Entire deposit refunded after deducting a 2% penalty |
Between 3rd and 5th year | Entire corpus refunded with 1% penalty |
Comparing Post Office MIS with other Monthly Income Plans
POMIS | Monthly Income Mutual Fund | Monthly Income Insurance |
Assured income at an annual rate of 6.6% | Invested in 20:80 equity-debt ratio and hence no guaranteed income | Monthly annuities (rates vary based on premiums & period) |
No TDS | TDS applied | Annuity is taxed |
Fixed return rate | Floating rate as per the market movement | NA |
Low-risk, suitable for the risk-averse | Suitable for people with a high-risk appetite | Double benefits of investment & insurance |
Withdrawal permitted after 12 months with penalty | Exit load applicable if withdrawn before time | Higher surrender charges as this is a long-term investment |
Limit of Rs. 4.5 lakhs per account and Rs. 9 lakhs for a shared account | No investment limit | No investment limit |
Who should invest in POMIS?
POMIS has the flexibility and reliability that appeal to risk-averse investors, albeit with limited tax benefits. If you think, you belong to that category, now is the time to consider starting one.
Created & Posted by (Anuj)
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