Guide to Post Office Monthly Income Scheme
The Post Office Monthly Income Scheme (POMIS) is a Government of India backed small savings scheme that allows the investor (s) to set aside (save) a specific amount every month. Subsequently, interest is added to this investment at the applicable rate and paid out to the depositor(s) on a monthly basis.
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 lakhs individually or Rs. 9 lakhs jointly, and the investment period is 5 years. Capital protection is its primary objective. For the quarter ending 31 March 2019, interest rate is 7.7% per annum, payable monthly.
For instance, if Sharma has invested Rs. 4.5 lakhs in the post office monthly investment scheme for 5 years. As mentioned above, the interest rate is 7.7%. His monthly income will be Rs. 2888 for that period. Post-maturity, he can withdraw his 4.5 lakhs, either from any post office or get it to his savings account via Electronic Clearance Service.
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.
Start small: You can start with a nominal initial investment of Rs. 1500. As per your affordability, you can multiply this amount.
Guaranteed returns: You earn income in the form of interest every month. The returns are not inflation-beating, but is higher compared to other fixed income investments like FD.
Tax-efficiency: Though your post office investment doesn’t fall under Section 80C and the income is subject to taxation. On the other hand, it has no TDS either.
Eligibility: Only a resident Indian can open a POMIS account. NRIs cannot enjoy the benefits of this scheme. You can open it in your child’s name too, provided he/she is aged 10 or above.
Payout: You will receive the payout 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 lakhs in all of them together.
Joint account: You can open a joint account with 2 or 3 people. Regardless of who is contributing, it belongs to all account holders equally.
Fund movement: The investor can move the funds to an RD (recurring deposit), which is a feature Post Office has added recently.
Age: As mentioned above, you can start an account on behalf of a minor who is of age 10 and above. They can avail they fund when they become 18. However, the investment cannot exceed Rs. 3 lakhs for a minor. Minor after attaining majority has to apply for conversion of the account in his name.
Nominee: The investor can nominate a beneficiary (a family member) so that they can claim the benefits and corpus if the investor passes away.
Ease of money/interest transaction: You may collect the monthly interest directly from the post office or transfer it to your savings account. Reinvesting the interest in an SIP is also lucrative option.
Transfer: In the event of shifting from one city to another, you can easily transfer your investment to your post office in the current city at no extra cost.
Reinvestment: You may reinvest the corpus post maturity in the same scheme for another 5 years to get double benefits.
1. Identity Proof: Copy of government issued ID such as Passport / Voter ID card / Driving License/Aadhaar, etc.
2. Address Proof: Government issued ID or recent utility bills.
3. Photographs: Passport size photograph.
How to open a POMIS Account
Opening a post office monthly income scheme is not as tedious as you think. Before imagining long queues and even longer paperwork, please take a look at the step-by-step procedure.
a. Open a post office savings account, if you haven’t already.
b. Collect a POMIS application form from your post office.
c. Submit the duly filled form along with a Xerox copy of your ID, residential proofs and 2 passport-size photos at the post office. Please don’t forget to carry the originals for verification.
d. You will need to get the signatures of your witness or nominee(s) on the form.
e. Make the initial deposit via cash or cheque. If you give a post-dated cheque, that date will be considered as the account opening date.
Premature Withdrawal of the Scheme
Premature withdrawal /closure of POMIS account before maturity period (5 years) is allowed subject to following terms and conditions:
1. In case of premature withdrawal between 1 to 3 years of account opening, 2% discount on deposit is applicable.
2. In case of premature withdrawal between 3 to 5 years of account opening, 1% discount on deposit is applicable.
Maximum Investment Amount in Post Office MIS
Though there is no limit on the number of accounts held by individual, there are limits on the maximum amount that can be cumulatively invested across all POMIS accounts.
1. In case of sole operated account, maximum investment allowed in POMIS is Rs.4.5 lakhs.
2. In case of joint holders (up to 3 joint holders), maximum of Rs.9 lakhs can be invested in POMIS.
Comparing Post Office MIS with other Monthly Income Plans
|POMIS||Monthly Income Mutual Fund||Monthly Income Insurance|
|Assured income at 7.7% annual rate||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 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|
In short, 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.