How Does the Post Office Monthly Income Scheme Work?

The Indian investors are highly skewed towards fixed income assets as most of them are conservative. The reason behind the success of various fixed income schemes launched by the government is Indian investors prefer going for investments that provide assured returns and are either risk-free or bear minimal risk.

One such institution that offers fixed income instruments is India Post. Having penetrated the interiors of our nation, the post office is one of the most trusted Financial Institutions at least among the rural folk. People have been securing and preserving hard-earned savings with the post office even before banks were introduced in the economy.

India Post offers a host of savings schemes among which the most popular is POMIS, Post office monthly income scheme.

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How Does the Post Office Monthly Income Scheme work?

What is the Post Office Monthly Income Scheme?

POMIS is the monthly investment scheme offered by the post office under the cognizance of the Indian Finance Ministry.  It is a fixed income scheme that offers assured returns to the investors at a current rate of 7.3% for the quarter Jan to March 2020. The dividends are paid on a monthly basis; hence making it an excellent option as a secondary source of income.

POMIS is among the safest investment options that promises a decent return on investment. The scheme is available in rural areas.

See Also: List of Post office Tax Saving Schemes

The 3 Major Advantages of Investing in POMIS are:

1. It generates assured returns at a pre-determined rate.
2. It ensures capital preservation along with decent appreciation
3.  It generates far better returns over debt-based instruments.

See Also: Post Office Monthly Income Saving Scheme

What are the Characteristics of POMIS?

POMIS is not only a monthly investment scheme but also carries a bouquet of features for its customers. Some of the key features are:

1. Capital preservation: The money invested under the POMIS is safe as it is backed by the government.
2. Lower risk: The risk of investment in POMIS is almost negligible. As it is a fixed income scheme, it is well protected against uncertainties and risk of volatile markets.
3. Moderate tenure: Unlike other fixed return instruments, POMIS has a moderate lock-in period of 5 years that allows investors to either withdraw invested money or reinvest it for another 5 years.
4. Lower initial payment: POMIS allows you start small with a minimum initial investment of Rs 1,500 which can later be increased. 
5. Assured returns: The POMIS is a fixed income scheme that pays the investors on a monthly basis at a predetermined rate of interest. Though the interest earned on your POMIS investment is not inflation combating, it is more than most conservative schemes.
6. Tax-efficient: There is no tax deducted at source for your POMIS investments; but this investment does not enjoy section 80C benefits.
7. Multiple accounts can be opened: Under the POMIS scheme, you are not restricted to a single savings account. It allows you open multiple accounts with a combined cap on maximum investment of Rs 4.5 Lakhs.
8. Joint account: Under POMIS you can open an account in joint ownership with 2 to 3 people. The ownership is equally divided among all account holders or owners regardless of who is making the payment.
9. Flexibility with funds: The government has introduced the movement of interest earned to a recurring deposit. This feature was not present initially, but has then been added for the investor’s benefit.
10. Can be availed by minors as well: The POMIS can be availed by minors as well. Anyone who is of the age of 10 years or above can open the POMIS account. The funds, however, can be availed when they attain the age of 18 years. In the case of minors, the maximum cap on investment is Rs 3 Lakhs. This account can also be opened by a parent or guardian in the name of a minor. However, once the minor is of 18 years, he or she needs to apply for a conversion of the account in their name.

See Also: Post Office Saving Schemes - Overview, Plans And Benefits

How POMIS Works?

POMIS is a monthly investment plan that allows you get regular income with lump sum investment. The prevalent rate of return is 7.3% revised each quarter with a maturity period of 5 years. If you withdraw money within 1 year of deposit, you will not get anything. If you withdraw money between 1 to 3 years of deposit, you will get your deposit back with a 2% penalty. If you withdraw money after 3 years of deposit, you get your deposit back with a 1% penalty.

POMIS is an excellent way of ensuring a continuous monthly income. The account can be opened in the name of a beneficiary as well as for self. As the scheme is backed by the government, it is a risk-free investment.

See Also: Post Office Monthly Income Scheme

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