Post Office Monthly Income Scheme

What is Post Office Monthly Income Scheme?

Post Offices in India offer a lot of options for investing money. One of the many investments options offered is the Post Office Monthly Income Scheme (POMIS) plan. Like most schemes offered by Post Offices, POMIS is risk free and there is guaranteed returns.  

Eligibility

• Any Indian citizen can avail this scheme by opening an account under their own name. 
• Minors under the age of 10 years can also open their account through their guardians. 
• For a minor’s account investment is capped at Rs 3 lakh but it is not clubbed with the guardian’s independent investment. 
• A copy of identity proof along with a copy of address proof and passport size photographs is required to open a POMIS account. 
• NRIs are not allowed to open a POMIS account.

How it Works

• Account holders can deposit a lumpsum amount in his or her account, and can earn monthly interest on it. 
• The interest rate for POMIS is 7.60% for the first quarter of the financial year 2017-2018%. 
• Along with individual accounts, subscribers can opt for a joint account with two or three adults with equal share. 
• The minimum investment amount is Rs 1500, but the maximum amount for an individual is Rs 4.5 lakhs and Rs 9 lakhs for a joint account.
• Individuals can open as many accounts as they want but the combined limit must not cross the limit of Rs 4.5 lakhs.

Maturity and Withdrawal

• The maturity period as of 1st December 2011 for POMIS is 5 years. 
• In case of non-withdrawal after 5 years, the account will earn simple interest of post office saving account for 2 years.  
• No bonus is paid at maturity for accounts opened after 30^th November 2011. Accounts opened on or between 8th December 2007 and 30th November 2011 enjoys 5% as bonus at maturity. 
• Premature withdrawal is available only after the completion of a year. But, it attracts a penalty of 2% of the applicant’s investment and for withdrawal after completion of 3 years but before 5 years, 1% is deducted as penalty. 

Advantages

• Easy procedure of opening a POMIS account.
• The option of individual, joint and even minor account provides a lot of flexibility. 
• Individuals can convert their single account to joint account, and even vice versa. 
• Subscriber can transfer their account from one post office to another in case of a change in location. 
• Nomination facility is also available for POMIS.

Limitations

• Post Office Monthly Investment Scheme is not a tax saving instrument. 
• Interest earned is entirely taxable. 
• Premature withdrawal may lead to the deposit gets locked for a period of 5 years. 

Post Office Monthly Investment scheme is suited for individuals who are looking for a regular source of monthly incomes which is extremely safe. A lot of retired people and senior citizens who don’t have a regular source of income can opt for POMIS. For its risk free features and backing by the government, POMIS is suitable only for individuals looking regular monthly flow of income as it will not aid in achieving any financial goals due to lower interest rates.