Post Office Monthly Income Scheme (POMIS)

Budget 2023-24: For a single account, the maximum deposit limit for the monthly savings scheme is increased from Rs.4.5 lakh to Rs.9 lakh. On the other hand, in case of joint account, maximum deposit limit is enhanced from Rs.9 lakh to Rs.15 lakh.

The Post Office is one of the trusted places to invest money. In fact, most of the elderly people prefer depositing money in the Post Office. Throughout the nation, Post Office offices provide a variety of savings plans.

PAN and Aadhaar Mandatory for POMIS

Here are the details regarding necessity of PAN and Aadhar for POMIS: 

• The Ministry of Finance has standardized the account opening process by making both the Aadhaar number and PAN mandatory for all new POMIS investors. For applicants who have not yet been assigned an Aadhaar, the submission of an enrollment ID or proof of application is required at the time of opening. Subsequently, the account holder is granted a grace period of six months from the date of account inception to furnish their official Aadhaar details. 
• For existing account holders who had not yet registered their Aadhaar, the Ministry of Finance established a six-month window, effective from April 1, 2023, to provide these details and ensure their accounts remained fully compliant with the updated regulations.
• Investors are required to furnish their PAN within a two-month window from the date of account opening if their financial activity meets any of the following criteria:  

1. The account balance surpasses Rs. 50,000 at any point.  
2. The aggregate credits to the account exceed Rs. 1 lakh within a single financial year.  
3. The combined total of all withdrawals and transfers in a single month is greater than Rs. 10,000.  

Post Office Monthly Income Scheme Current Rate of Interest

The rate of interest offered on the Post Office Monthly Scheme is fixed by the Central government and finance ministry. The current rate of interest offered is 7.40%. This rate of interest is effective from 1 April 2023 onwards.

Key Features of Post Office Monthly Income Scheme

Key Features of Post Office Monthly Income Scheme:

• Lock-in period: While the Post Office Monthly Income Scheme has a total tenure of five years, your capital is strictly inaccessible only for the first twelve months. Following this initial one-year lock-in, you are permitted to withdraw your funds early if needed, though a small penalty will be applied to the refunded amount.

• Maximum limit: Individual investors are permitted to deposit up to Rs. 9 lakh, while the total investment limit for a joint account is capped at Rs. 15 lakh. 

• Scheme is transferable: Enjoy full nationwide portability by transferring your POMIS account to any local post office if you move. You can also collaborate with up to two others on a joint account, which currently supports a maximum investment of Rs. 15 lakh. 
• Minor account: Minors who have reached 10 years of age are eligible to have a POMIS account opened in their name. Once the account holder attains adulthood at 18 years, they must apply to have the account officially transferred to their name to gain full control over the management and withdrawal of the funds. 
• Every Indian is allowed to invest in this scheme: Any resident Indian can enroll in this government-backed savings plan to secure a steady income.
• Auto-withdrawal: You can opt for the auto-credit facility, which ensures your monthly interest is automatically transferred directly into your linked savings account for a seamless income stream.
• Penalty: If you need to access your capital before the full five-year term concludes, you can opt for an early withdrawal after the initial one-year restricted period, though it will incur a nominal penalty fee on your principal.
• Investment amount: You can kickstart your savings with a minimum deposit of Rs. 1,000. 
• Tax benefits: Unlike tax-saving instruments like the NSC, this scheme does not offer any deductions under Section 80C, and the interest you earn is fully taxable based on your income slab.
• Nomination facility: Account holders may appoint nominees post-opening to facilitate the smooth transfer of assets to beneficiaries in the unfortunate event of the holder’s demise.

• Maturity period: The account reaches full maturity exactly five years from the date of its inception.

• POMIS bonus: The 5% maturity bonus, once a hallmark of the scheme, is no longer applicable to any accounts initiated after December 1, 2011.

• Reinvestment: Once your initial five-year term concludes, you have the flexibility to reinvest the matured principal into a fresh POMIS cycle for another five years to continue your steady income stream.

• Interest transaction: Collecting your monthly interest is entirely hassle-free—you can either drop by the post office for a physical withdrawal or set up an automatic transfer directly into your savings account.
• Fund movement: You have the strategic option to redirect your monthly interest proceeds into other post office vehicles, such as a Recurring Deposit (RD), to further compound your wealth rather than just receiving the payout.

• Guaranteed returns: While this scheme typically offers superior yields compared to standard fixed deposits, its primary strength lies in providing a dependable monthly paycheck rather than strictly outpacing inflation.

• Low-risk investment: TYour deposit is entirely market-neutral, making it a rock-solid safe haven since it isn't vulnerable to the typical ups and downs of the economy.

Benefits of POMIS

Some of the benefits of the Post Office Monthly Income Scheme are:

Account Inception and Timing 

Realization-Based Opening: The official start date of your account is the day your cheque is cleared and realized by the post office, rather than the date the application was submitted.

Ownership and Equity

Equal Stake in Joint Accounts: For accounts held by multiple individuals, all holders are treated as equal owners with an identical share in the investment and the resulting interest.

Account Holding Flexibility

Unlimited Account Volume: You are permitted to open multiple POMIS accounts across different post offices, provided the cumulative balance across all accounts (individual or joint) stays within the government-mandated limits of Rs. 9 lakh and Rs. 15 lakh, respectively.

Minor Account Management

Path to Financial Independence: An adult can initiate an account for a minor aged 10 or older. Once the minor reaches 18 years of age, they are eligible to take full control and manage the funds independently.

Automated Interest Payouts

Seamless Monthly Credits: The system is designed for convenience; your interest is automatically credited each month into your linked post office savings account via ECS (Electronic Clearing Service) or CBS (Core Banking System).

Maturity Grace Period

Post-Maturity Earnings: If the principal remains unwithdrawn after the five-year term ends, the funds will continue to earn a nominal interest rate (equivalent to a standard Post Office Savings Account rate) for a limited duration.

Eligibility for POMIS

The following is the list of eligibility of POMIS:

• Must be Indian resident

• Adults can only open this account

• Account can be opened on behalf of minor of age 10 years or above

• The fund can be availed by the minor once they attain 18 years of age

• After attaining the age, the minor need to apply for change of name in the account

• The account type allowed is single and joint (two to three holders) with maximum investment limit of Rs.9 lakh and Rs.15 lakh, respectively.

Documents Required to Open POMIS

The following is the list of documents required to open Post Office Monthly Income Scheme:

• Passport sixed photographs

• Government issued ID or recent utility bills as proof of address

• Voter ID card, passport, driving license, Aadhaar, etc., as identity proof

How Post Office Monthly Income Scheme Works

The process of investing in POMIS can be done easily and requires minimal documentation. The investor will be required to submit a copy of his/her identity proof, an address proof, and some passport size photographs. The ID proof can be the passport, ration card, PAN card, or voter identity card.

At the beginning, the customer is required to open an account, either on an individual basis or as a joint account. The table below shows the minimum and maximum funds that can be invested in the post office monthly income scheme:

Let us analyse the investment process in MIS through an example:

Suppose Mr. X invests Rs.1 lakh in the scheme, with a maturity period of 5 years. At the annual interest rate of 6.6%, he will receive a fixed monthly payout of Rs.550. At the end of the investment term, i.e., 5 years, he will get back the amount he deposited. In this case, Mr. X will receive an amount of Rs.33,000 at the end of the deposit tenure. This money can be withdrawn in two modes, i.e., he can either receive it directly from the post office or as a credit in his savings account through ECS. This amount can be withdrawn on a monthly basis; however, if desired by the customer, he can allow it to accumulate over a period of few months and then withdraw the accrued amount. The latter option is not very lucrative, as the accumulated funds do not earn any interests.

A new feature has now been added to POMIS in order to make if more effective, in terms of returns. The customer can associate the account with a recurring deposit. Hence, the interest earned on the scheme can be invested in the recurring deposit on a monthly frequency. This is a great way to let your money grow, while still staying invested in the scheme.

How to Open a POMIS Account: Step-by-Step Guide

It is very convenient and easy to open a POMIS account because you don’t have to stand in long queues to complete the procedure. Moreover, there is less paperwork involved in this process.

Let us have a look at the steps given below to open a POMIS account: 

1. Step 1: Open a post office savings account. 
2. Step 2: Visit your nearest post office and collect a POMIS application from the counter. 
3. Step 3: Fill in all the required details on the POMIS application form.  
4. Step 4: Submit the duly filled application by enclosing the scanned copies of your identity proofs, residential proofs, and two passport size photographs at the post office.
5. Step 5: Carry your original documents for verification. 
6. Step 6: Get the signature of your nominee done on the application form.
7. Step 7: Make the initial deposit through cash or cheque.         
8. Step 8: Details of your POMIS account will be issued to you by the post office executive. 

POMIS Early Withdrawal Penalty

If you choose to withdraw the investment corpus before the end of the lock-in period, then a penalty is levied.

The penalty you will incur is:

POMIS vs Other Income Plans

Here is the list of difference between POMIS with other income plans:

• POMIS vs NSC (National Savings Certificate) vs Bank FD (Fixed Deposit)

• Difference between POMIS, Mutual Fund Monthly Income Plan, and Insurance Monthly income plan: