Post Office Monthly Income Scheme – Features and Benefits
Post office depository service has a wide assortment of schemes that offer fixed returns on investment. These schemes are all stringed with the benefit of sovereign guarantee, i.e. this investment avenue is government-backed.
Therefore, these schemes are safer investment options compared to equity shares and many fixed-income options.
Post Office Monthly Income Scheme, amongst others such as Post Office Savings Account, Post Office Recurring Deposit, Post Office Time Deposit, is one of the highest-earning schemes with an interest rate of 7.6%. The interest in this scheme, as the name suggests, is disbursed monthly. This scheme, like other post office schemes, is recognized and validated by The Ministry of Finance.
POMIS account opening procedure
Opening a Post Office Monthly Income Scheme Account (MIS) is easy and hassle-free. However, to invest in the scheme, you need to have a Post Office Savings Account. After opening a savings account with the Post Office – if you did not already have one – you can adhere to the following procedure –
- Procure a POMIS Form from your nearest post office.
- Submit the form along with the following documents – photocopy of ID proof, photocopy of address proof, 2 passport-sized photographs.
- Submit the originals for the documents mentioned above for verification purposes.
- Collate signatures of witnesses or beneficiaries.
You can invest the capital amount through a dated cheque. The date mentioned on the cheque will be considered as the account opening date. The interest earned on the investment will be disbursed one month from the opening date.
The beneficiary can also be nominated after opening the Post Office Monthly Income Scheme in India account.
Features of POMIS
- Lock-in period: When you open a Monthly Income Scheme account with a post office, you cannot withdraw the amount deposited in such account prior to 5 years.
- Maximum limit: You can make a maximum investment of Rs. 4.5 Lakh in the scheme. Even if you hold the scheme in multiple post offices, the aggregate of all your deposit cannot exceed Rs. 4.5 Lakh.
In case of joint accounts as well, the share of your investment should be within the specified limit. The maximum limit for minor accounts is Rs. 3 Lakh. The minimum amount which can be invested is Rs. 1,500 for any individual.
- Transferrable: In case, you are changing your residential status to a different city anywhere in India, you can transfer your POMIS account to a convenient post office. Your Post Office Monthly Income Scheme investment corpus and interest disbursal will be carried forward to such post office.
- Joint account: A maximum of 3 individuals can open a joint account for this scheme. In case of joint accounts, each investor possesses equal rights over the account. The maximum limit in case of joint accounts is Rs. 9 Lakh, and singular limit is Rs. 4.5 Lakh.
- Minor account: You can open a POMIS minor account in the name of your child. The Post Office Monthly Income Scheme age limit for minors is above 10 years. He/she can withdraw the amount after maturing to 18 years.
- Eligible residential status: Every Indian citizen is eligible to open a POMIS account; however, NRI individuals cannot.
- Auto-withdrawal: You can opt to withdraw the monthly interest amount on your investment through automatic transfer to your savings account through PDCs or ECS. If the POMIS account is with a CBS Post Office, then the interest amount can be directed towards any other CBS centric savings account.
- Penalty: In case you wish to withdraw your investment corpus before the lapse of the lock-in period, a penalty is charged on the withdrawal amount depending on the time of such redemption.
If you redeem your investment within the 1st and 3rd year, a 2% penalty is charged. If you redeem within the 3rd and 5th year, a 1% penalty is charged.
- Investment amount: Any amount in the multiple of Rs. 100 is admissible as an investment.
- Tax benefits: The interest amount does not incur any Tax Deducted at Source (TDS); however, it also does not attract any tax benefits under Section 80C.
The following table demonstrates the maximum investment limit for the Post Office Monthly Income Scheme.
|Account Type||Maximum Limit|
|Single Account||Rs. 4.5 Lakh|
|Joint Account||Rs. 9 Lakh|
|Minor Account||Rs. 3 Lakh|
Benefits of Post Office Monthly Income Scheme (MIS)
There are two major benefits to investing in POMIS. As it is not a market-linked investment scheme and is guaranteed by the government, it is a go-to option for many investors with a low-risk appetite. These benefits are –
- Steady returns: You would earn a steady flow of income every month on your investment corpus irrespective of market fluctuations. An interest rate of 7.6% p.a. is fixed by the post office.
Suppose Ms. Anushka invests Rs. 4 Lakh in POMIS on 1.4.14. Then every month, her interest income from the same would be Rs. 2,533.
- Reinvestment: You can decide to invest the interest earned into high-profit yielding securities such as equity shares, equity fund; however, these investment options also entail much higher risk.
Hybrid funds, comprising both equity funds and fixed income instruments, are a viable option to engage in the stock market, develop a diverse investment portfolio, earn comparatively higher returns and take lower risk compared to equity shares and funds.
You can also reinvest the funds in Post Office Recurring Deposit, a feature recently added by Post Office.
Post Office Monthly Income Scheme Vs other saving schemes
|Savings Scheme||Rate of Interest||TDS|
|Post Office Monthly Income Scheme||7.6%||No TDS is deducted|
|Post Office Recurring Deposit||7.2%||No TDS is deducted|
|Post Office Time Deposit (1,2,3 years)||6.9%||No TDS is deducted|
|Post Office Time Deposit (5 years)||7.7%||TDS is deducted|
|National Savings Certificate||7.9%||TDS is deducted|
|Senior Citizen Savings Scheme||8.6%||TDS is deducted|
|Public Provident Fund||7.9%||TDS is deducted|
Investment of accumulated capital is always better employed in such schemes or mutual funds to earn profits from the same, rather than in savings accounts.
Initially, low-risk schemes like a Post Office Monthly Income Scheme in India are a viable starting point. It provides the individual with the confidence to take on greater risks in the future to earn higher profits by exercising a similar amount of capital.