Post offices in India offer a few basic banking services. Post Office Monthly Income Scheme or POMIS is a scheme under which individuals earning a fixed monthly income, invest a certain percentage of their income, to earn a fixed rate of interest each month.
Post office monthly income scheme is currently offering an interest of 7.7% per year. It has a 5 year lock-in. Consider this example: Mr Raju invests Rs 4 Lakhs in the post office monthly income scheme. He will receive Rs 2,566 each month through POMIS.
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Protection of your capital: Post office monthly income scheme is a government facilitated scheme and your investment is safe throughout the tenure.
Tenor: The tenure or lock-in period in Post Office monthly income scheme is 5 years. For maximum benefits, you must wait till maturity of the investment.
Low risk: As this is a fixed income scheme, investment made is not affected by stock market fluctuations and is safe.
Start with small investment: You can start investing amounts as low as Rs 1,500 a month. You can start investing more in the following months.
Guaranteed returns: You earn a guaranteed income in the form of interest each month. Interest earned on POMIS is higher when compared to other fixed income investments like FD.
Tax-efficiency: Post office monthly income scheme does not enjoy tax benefits under Section 80C of the income tax act and is not tax efficient. The interest income earned through POMIS is taxed as per income tax slabs. There is no TDS applicable on this scheme.
Eligibility: All resident Indian citizens are eligible to invest in post office monthly income scheme. Non-resident Indian NRIs, are not eligible for this scheme. You can open an account in post office monthly income scheme in your child’s name, for this the child must be at least 10 years old.
Multiple account ownership: You are allowed to open more than one account under post office monthly income scheme. But, the total investment cannot exceed Rs 4.5 lakhs across all accounts. The maximum investment amount in POMIS is Rs 4.5 Lakhs.
Joint account: Two or three individuals can open POMIS joint account. The account belongs to all holders regardless of who is making the deposits.
Fund movement: Investors can move the funds to recurring deposit RD, which is a new service that the post Office started recently.
Age: Minimum age for investing in this scheme is 10 years. Parents or guardians would handle the accounts of those individuals who are less than 18 years of age (minors). Maximum investment in a minor’s account is Rs 3 Lakhs. Minors must apply for conversion of account when they attain the age of 18 years to gain control of the account.
Nominee or beneficiary: The investor can nominate a beneficiary to whom the benefits and corpus would be handed over, if the investor dies.
Ease of money/interest transaction: You can either collect the monthly interest directly from the post office, or you can instruct the post office to transfer it to your bank account. Post office also allows reinvesting the interest earned in an SIP.
Transfer: If you are shifting to another city, then you can easily transfer your POMIS investment to a post office in your new city.
Reinvestment: You can reinvest the investment post maturity under the same scheme for another 5 years to earn double benefits.
Below mentioned are the requisite documents to open a post office monthly income scheme account:
As post office monthly income scheme is a type of fixed deposit scheme, there are penalties levied on the interest earned for all premature withdrawals. Below table shows the penalties levied on premature withdrawals in the post office monthly income scheme:
Time of POMIS withdrawal
The outcome of premature withdrawal
Withdrawals made within one year
The money invested is fully refunded. There is no interest offered on withdrawals made within a year.
Closing accounts between the first and third years of the investment
The money invested is refunded fully but a penalty of 2% would be levied on the interest earned.
Closing accounts after third year but before fifth year
The money invested is fully refunded but a penalty of 1% would be levied on the interest earned.
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