Post Office Monthly Income Scheme (POMIS) is an investment scheme of the Indian postal service. It promises the investor guaranteed returns at 7.4% per annum in the form of fixed monthly income. The Union Government revises these interest rates each quarter.
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Some notable features of the scheme are as under:
POMIS account is transferable from one post office to another free of cost.
For every post office deposit, investors can open multiple accounts.
The maturity amount realized at the end of the term can be reinvested in POMIS.
The investor can also appoint a nominee for their Post Office Monthly Income Scheme account. In case of multiple nominees, the primary account holder must specify the share of entitlement for nominee/beneficiary.
There is no TDS (Tax Deduction at Source) but the interest earned is taxable.
When the scheme matures in 5 years, you can either withdraw the total accrued amount or reinvest in the scheme. However, the investors keep getting fixed monthly income during this period.
To invest in the Post Office Monthly Income Scheme, you must meet the following eligibility criteria:
A single adult
Joint Account (up to 3 adults)
Guardian on behalf of minor / person of unsound mind
Minor above 10 years of age in his/her name
Minimum investment: Rs 1,000 (additional deposit in multiples of 1000)
Maximum investment: Rs 9 lakhs for single account and Rs 15 lakhs for joint account
All individual holders of a joint account have equal share
All MIS accounts of a single person shall not exceed the deposit limit of Rs 9 lakhs
Separate limits apply for opening a minor’s account
Interest payable monthly till maturity
Tax on interest apply at the hands of depositor
Unclaimed monthly interest does not earn additional interest
If you have to withdraw the money before 5 years, here’s what happens:
You cannot withdraw amount within the first year of deposit.
If the account is closed between 1 to 3 years, a penalty of 2% of principal will be levied and remaining amount will be transferred to your account.
If the account is closed between 3 to 5 years, a penalty of 1% of principal will be levied and remaining amount will be transferred to your account.
Some major disadvantages of the scheme are:
Post Office Monthly Income Scheme does not offer any tax rebate under section 80C.
If the monthly payouts are not withdrawn, they sit idle and do not yield any interest.
No TDS is applicable on the Post Office MIS, but the interest income is taxable.
Making an investment in Post Office Monthly Income Scheme is as easy as a pie and requires minimal documentation. The investor needs to submit a copy of the address proof and identity proof (passport/PAN card/ration card/voter identity card) and passport size photographs.
To get started, the investor needs to open an account. He can opt for either an individual account or a joint account.
The table below shows the minimum and maximum amount that can be invested in the Post Office Monthly Income Scheme as per budget 2023.
|Single Account||Rs 9,00,000|
|Joint Account||Rs 15,00,000|
|Minor Account||As stated at the time of account opening|
Mr. Sharma chooses to make an investment in MIS. He invests Rs 4,50,000 with a maturity period of 5 years. At an annual interest rate of 7.4%, he should get a fixed payout of Rs 2,775 every month (this figure can be summed out very easily on a Post Office Monthly Income Scheme calculator available online). At the end of the investment tenure, he’ll get his deposit money back.
The money can be withdrawn in two ways, either directly from the post office or get credited to your savings account through ECS. The money is usually meant to be withdrawn on a monthly basis. However, the investor can let it accumulate over a few months and then withdraw it but it’s not of much use as the idle money will not earn you any interest.
To make the Post Office Monthly Income Scheme more effective at yielding returns, a new feature was added to it. The investor has the option of combining it with a recurring deposit wherein the interest that you earn on a monthly basis is invested in a recurring deposit. This, in turn, lets your money grow even more money.
People often get confused between the Monthly Income Scheme and Monthly Income Plan. To make it worse the Monthly Income Plan itself is used both in the context of insurance and mutual funds. Here are the essential differences between the three. Hopefully, it’ll bust out the misconceptions once and for all.
|Monthly Income Scheme||Monthly Income Plan(Mutual Fund)||Monthly Income Plan (Insurance)|
|A post office investment scheme guarantees fixed monthly income at a 7.4% annual rate||A debt oriented mutual fund in which the investment is made in equity-debt instruments in a 20:80 ratio||A variant of retirement plan in which the annuities are paid to the insured in form of monthly income|
|Monthly income is guaranteed||Monthly income is not guaranteed. Rather, it depends on the returns earned for that particular period||Monthly income is fixed and guaranteed. It is created out of the nest egg of the premiums paid throughout the policy tenure|
|TDS is not applicable. However, interest earned is taxable||TDS is not applicable||The annuity paid monthly is taxable|
|MIS suits best to those who cannot afford to bear any risk such as old aged and retired people||MIPs are for those risk-averse investors who like to stay somewhere in between the safe-but-unyielding debt funds and the risky-but-yielding equity funds||Retirement monthly income plans are for those who are looking to get the dual benefits of insurance and investment|
|The locking period is just 1 year after which the investor can withdraw the money, but not without incurring 1-2% penalty charges||The investor has to incur a 1% exit load for cashing the units within 1 year of investment||The investment tenure is quite long (as this is a long term plan) and the insured has to incur surrender charges for withdrawing the amount before the policy term|
|There's a limit to the amount you can invest in POMIS (9 lakhs for a single account, 15 lakhs for a joint account)||There's no such limit on investment amount in MIPs||No limit on investment amount|
|Returns are fixed||The returns are not fixed. They can shoot up to 14% at times or tumble down even negatively.||The motive of monthly income plans is to ensure and secure the capital, rather than getting the returns|
The Post Office Monthly Income Scheme has faced a steep decrease in the interest rate from 8.40% to 7.4%, payable monthly. The interest rate prior to 1 April 2016 was 8.40%. Here, it is important to know that the income earned by interest through this scheme is taxable.
In addition, an individual can invest a maximum of Rs. 4,50,000 in Post Office Monthly Income Scheme. This amount includes his/her share in the joint accounts. The minimum deposit is Rs. 1,000 and deposits are accepted in the multiples of Rs. 1,000.
|Period||Post Office MIS Interest Rate (Annual)|
|1st October 2022 - 31st December 2022||6.70%|
|1st July 2022 – 30th September 2022||6.60%|
|1st April 2022 – 30th June 2022||6.60%|
|1st April 2021 – 31st December 2021||6.60%|
|1st April 2018 – 30th June 2018||7.3%|
|1st January 2018 – 31st March 2018||7.3%|
|1st October 2017 – 31st December 2017||7.5%|
|1st July 2017 – 30th September 2017||7.5%|
|1st April 2017 – 30th June 2017||7.6%|
Investing in a Post Office Monthly Income Scheme (MIS) is quick and easy. You can open a POMIS savings account at your nearest Post Office branch.
Follow these steps to open MIS account:
Obtain a POMIS Form from a nearby post office
Submit the completed form with photocopies of:
2 passport-sized photos
Present original copies of the documents for verification
Gather signatures from witnesses or beneficiaries
You can invest by writing a date on the cheque, which is also considered the date of account opening. The interest earned on the investment is paid out each month after the completion of the first month. The nomination facility is available for all Post Office Monthly Income Scheme account holders.
Before the completion of 1 year, you will not get any benefits.
From 1 to 3 years your entire deposit is refunded with a 2% penalty.
From the 4th year to the 5th year, the entire corpus is refunded with a 1% penalty.
The Post Office Monthly Income Scheme (POMIS) is a safe and secure investment option that offers substantial returns with a short lock-in period. The scheme guarantees a fixed monthly income with an interest rate of 7.4% per annum. It is a perfect investment avenue for people who prefer debt investment with good returns.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
+Returns Since Inception of LIC Growth Fund
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