What is Post Office Monthly Income Scheme (POMIS) ?

 

The Post Office Monthly Income Scheme (POMIS) is a savings scheme offered by the Indian government through the India Post (the Indian postal system). It's designed to provide a regular and stable monthly income to investors who want to invest a lump sum amount.

 

How does it work?

 

Step 1: You deposit a certain amount of money

 

Step 2: The interest rate that is applicable on that day is locked for the entire tenure.

 

Step 3: Interest is calculated and credited to your savings account after one month from the date of account opening and so on till maturity.

 

Step 4: On maturity, you get back the principal amount, what you invested initially along with any accumulated interest. Also if you want to reinvest you can reinvest the amount for another block of 5 years. 

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How much one can Invest?

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• The minimum one can invest is ₹ 1000/- and in multiples of ₹ 1000/- thereafter.

• The maximum investment limit is INR 9 lakh in a single account and INR 15 lakh in a joint account

• An individual can invest a maximum of INR 9 lakh in MIS (including his share in joint accounts)

• For the calculation of the share of an individual in the joint account, each joint holder has an equal share in each joint account.

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Interest Rate :

 

The Interest offered by Post Office MIS as of 1st July 2023 is 7.40% p.a. payable monthly. Interest can be drawn through auto credit into a savings account standing at the same post office, or ECS. 

 

The Interest is however taxable in the hands of investors. The interest is straight away added to the income of investors. If an investor is in a 30% tax bracket the net yield after tax comes to 5.18 per cent. Hence it is not advisable for investors in such a high bracket to invest in this product.

 

Taxation:

 

The interest income from Post Office MIS is added to investors' income and taxed according to the tax slab. As explained earlier investors in high tax brackets will have to bear higher taxes on their interest income. However, there is no TDS deduction applicable to the interest earned.

 

Lock-in Period :

 

The lock-in period for Post Office MIS is 5 years.  However, in case of emergency one is allowed to prematurely close the Post office MIS.

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• If the account is closed after 1 year and before 3 years from the date of account opening, a deduction equal to 2% from the principal will be deducted and the remaining amount will be paid.

• If the account is closed after 3 years and before 5 years from the date of account opening, a deduction equal to 1% from the principal will be deducted and the remaining amount will be paid.

• The account can be prematurely closed by submitting the prescribed application form with a passbook at the concerned Post Office. ​

 

What happens in case of death?

 

In case of the death of the investor, the investment along with accumulated interest is paid to the nominee or the legal heir.

 

How does one start investing in Post Office MIS?

 

One can visit their nearby post office and start their investment in Post Office MIS. One form needs to be signed and a KYC document needs to be submitted along with the initial investment payment. KYC documents will include one recent photograph, Pan card copy, Aadhaar Card copy, Passport or Driving License

 

Suitability :

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Post Office MIS as an investment is suitable for investors who want a monthly income from their investments and don’t want to take risks on their investments. Only risk-averse investors should opt for this investment. If you are looking for long-term one can always look at other investment options available like Hybrid Mutual Funds. Almost all mutual funds now offer Sysytematic Withdrawal Plan on their schemes, which works just like monthly income and is more tax efficient.

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Also, for the long term one should take some risks and invest in Equity Mutual Funds and make better returns on their investment.