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Post Office Monthly Income Scheme: POMIS

Post office monthly income scheme what is it? What are its benefits? The postal service has a variety of systems that offer a fixed return on investment. All of these systems are flexible with a state guarantee, that is, this investment opportunity is supported by the state (government-backed).

Therefore, investing in these schemes is a safer investment option compared to equities and many other fixed-income schemes.

The monthly postal income scheme among others, like a postal office savings account, Recurring Postal Deposits, Post Office Time Deposit, is one of the most productive scheme with an interest rate of 7.6%. As the name implies, scheme interest is paid monthly. This scheme, like other postal services, has been recognized and supported by the Ministry of Finance.

Post office monthly income scheme account opening method

POMIS account opening is easy and convenient. However, you must have a savings account in the post office to invest in the scheme. Once you have opened a savings account at the post office – if you do not have one – you can follow the steps below:

  • Get the POMIS form at your nearest post office.
  • After getting the form submit the form with the following documents:

         i.    photocopy of identity proof

        ii.   address proof photocopy

        iii.  2 passport photos

  • Submit the originals of the above-mentioned documents for verification.
  • Witnesses or beneficiaries collate signatures.

With a dated check, you can invest the capital amount in this scheme. The date of the check is considered the opening date of the account. The investment interest will be paid one month after the opening date of the account.

The nominee can also be appointed after the opening of the monthly post office income scheme by the beneficiary.

Also Read: Post Office Bank Account Opening: Explained

Post Office Monthly Income Scheme feature

Lock-in period

When you open a monthly income account with the post office, you cannot withdraw the amount deposited from that account before 5 years.

Maximum limit

You can invest up to Rs. 4.5 lakh maximum in the scheme. Even if you have grasped the scheme at many post offices, your deposit amount should not exceed Rs. 4.5 lakh.

Even in the case of joint accounts, your share of the investment must be within set limits. The maximum limit for a minor account is Rs. 3 lakh. For any individual Rs, 1500 is the minimum amount to be invested.

Transferrable

If you are moving to another city anywhere in India, you can transfer your POMIS account to an appropriate post office. Corpus of your monthly investment and interest payments will be transferred to that post office.

Joint account

Up to 3 people can open a joint account for the POMIS scheme. In the case of joint accounts, each investor has an equal right over the account. The maximum limit of investment for joint accounts is Rs. 9 lakes and the limit for a solo account is Rs. 4.5 lakh.

Minor account

You can open a minor account under this scheme with your child’s name. The age limit for the POMIS account for minors account is above 10 years. After 18 years of age, he/she can claim to convert his/her minor account to an adult account.

Eligible residence

Every Indian citizen has the right to open a POMIS account; however, the NRIs cannot open POMIS.

Auto withdraw

You can save monthly interest on your investment by automatically transferring it to your savings account using PDC or ECS. Your interested amount can be directed towards any other CBS centric savings account if your POMIS account is with CBS post office.

Penalty

If you want to withdraw your investment before the end of the lock-in period, there will be a penalty on the withdrawn amount which will be depending on the time of such redemption.

In case you withdraw in the first and third year, a penalty of 2 percent is charged. If you withdraw your investment in the 3rd and 5th year then you will have to pay a penalty of 1 percent.

Investment amount

All amounts multiplied by Rs. 100 are eligible investments.

Tax benefits

There is no tax deduction at source (TDS) on earned interested amount. However, the interested amount is taxable under section 80C.

The following table shows the maximum investment amount limit for the monthly post office income scheme.

Account Type Maximum Limit
Single Account    Rs. 4.5 lakh
Joint Account    Rs. 9 lakh
Minor Account    Rs. 3 lakh

Benefits of POMIS

Investing in POMIS has two main advantages. As it is not a market investment plan and is guaranteed by the government, it is a choice for many low-risk investors. POMIS’s benefits are: 

Stable returns

You get a steady supply of income from your investment corpus every month, regardless of market fluctuations. The rate of interest is 7.6% per year is fixed by the post office.

Suppose Mr. Madan invested Rs. 4 lakh in POMIS on 01.04.14 then Mr. Madan’s every month interest income from the invested amount would be Rs. 2533.

Reinvestment

You can invest the earned interest in high returns on securities such as stocks, mutual funds; however, there is a much greater risk associated with these investment opportunities.

Hybrid funds, which include equity funds and fixed income investments, are a viable option for equity market participation, developing a diverse investment portfolio, achieving relatively higher returns and less risk compared to equities and mutual funds.

You can also reinvest your funds in Post Office Recurring Deposit scheme, a features recently added by  post office.

POMIS vs other saving schemes

Saving 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 Saving Certificate 7.9%              TDS is Deducted
Senior Citizen Saving Scheme 8.6%              TDS is Deducted
Public Provident Fund 7.9%              TDS is Deducted

It is always better to use accumulated investments in such schemes or mutual funds to earn benefits from these investments rather than in saving accounts.

Initially, schemes of low risk such as the Post Office Monthly Income Scheme in India gives a person the certainty to take more risk in the future and achieve a higher return with adequate capital.

 

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