Post Office is one of the most trusted places to keep your money, especially for risk-averse individuals. Post Office offers several saving schemes across the country. Post Office Monthly Income Scheme (POMIS) is one such scheme. POMIS is a low-risk monthly income scheme that generates a steady income. The interest rate on POMIS is fixed by the central government and Finance Ministry every quarter. The interest rate for Q2 (July-September) of FY22 is 6.60% p.a., payable monthly. Under this scheme, a person needs to invest a certain amount of money, on which he earns a fixed interest every month. It is a one-time investment that serves the purpose of steady income.
For Example, Mrs. Renuka Verma invested Rs. 3 lakhs in POMIS for 5 years at 6.6% p.a. Her monthly income will be (Rs. 3 lakhs X 6.6%)/12 = Rs. 1,650. After completion of 5 years, she can withdraw her initial investment of Rs. 5 lakhs. Alternatively, she can renew her POMIS account.
Features of POMIS
- Eligibility: Any adult, who is a resident of India can open a POMIS account, either individually or jointly. A minor who is aged 10 years or more can open an account with his guardian. Non-individuals and NRIs are not eligible to open an account under this scheme.
- Low-Risk: The amount invested in POMIS is not subject to market risk and thus is free from any kind of volatility. POMIS is one of the safest options to invest in.
- Capital: The capital amount invested in POMIS is fully safe until maturity as it is a government-backed scheme.
- Tenure: The tenure or lock-in period for POMIS is 5 years. At maturity, you have an option to either withdraw your money or reinvest it.
- Amount Invested: A POMIS account can be opened with a minimum of Rs. 1,000 and in multiples thereof. The maximum investment through a single account is Rs. 4.5 lakhs and through a joint account is Rs. 9 lakhs.
- Returns: As mentioned earlier, currently POMIS earns interest at 6.6% p.a., paid on monthly basis. POMIS guarantees a return on investment every month.
- Tax: Investment in POMIS is not covered under Section 80C, therefore, no deduction is allowed for such investment. However, TDS is not applicable for such investments.
- Payout: Interest is paid on monthly basis. Interest is received after one month of making the first investment, instead of the first day of every month.
- Multiple Accounts: Although one person can open more than one account, his total investment under this scheme can not exceed Rs. 4.5 lakhs.
- Joint Account: Joint account can be opened with 2 or 3 persons, and in such cases, the maximum investable amount becomes Rs. 9 lakhs.
- Nominee: POMIS allows the account holder to nominate a beneficiary so that they can claim the benefits of such an account if the investor passes away during the tenure of the account.
- Transfer Facility: Post Office recently added a new feature, whereby the investor can transfer his funds to a recurring deposit account or from one post office to another.
- Account Closure: The POMIS account has a maturity of 5 years from the date of opening the account. The account holder, under no circumstances, can close the account before the completion of one year from the date of opening. If the account is closed between 1-3 years, the entire amount is refunded after deducting 2% of invested amount as a penalty. If the account is closed between 3-5 years, the entire deposit is refunded after deducting 1% of the amount as a penalty.
How to open a POMIS account
Following are the steps to open a POMIS account:
- You must have a Post Office Saving Account. Open such an account in case you do not already have one.
- Collect an application form from any post office or download such application form online.
- Fill and submit the form along with the copies of required documents at a post office. All the documents should be self-attested. You must carry original documents with you for the verification process. The documents required are: any identity proof issued by the government, address proof like any government-issued ID or latest utility bill, and your passport size photographs.
- You need to mention the name, date of birth, and mobile number of the nominees (if any)
- Now you can make an initial deposit via cash or cheque and once the processing is done, you will receive the information about your newly opened account.
POMIS vs. Bank FD vs. National Saving Certificate (NSC)
|Interest rate||Fixed-rate of interest at 6.6%.||Fixed-rate of interest. May vary between 5-7.25%.||Fixed interest rate of 6.8%.|
|Investment limit||There is an investment limit of Rs. 4.5 lakhs on a single account and Rs. 9 lakhs on a joint account.||No Investment limit.||No maximum investment limit.|
|TDS||TDS is not applicable.||TDS is applicable.||TDS is not applicable.|
|Tax Benefits||No tax benefits allowed.||Deposits in Bank FDs eligible for deduction u/s 80C (if certain conditions are fulfilled).||Deposits in NSC qualifies for deduction u/s 80C.|
|Maturity Period||POMIS has a tenure of 5 years.||The maturity of Bank FDs may vary from 7 days to 10 years.||NSC has two fixed maturity periods: 5 years and 10 years.|
|Premature Withdrawals||Premature Withdrawal is possible, but a penalty is levied on such withdrawals.||Premature Withdrawal is possible, but a penalty will be applied as per the policy of the bank.||Premature Withdrawal is possible only under special cases.|
|Frequency of Interest payment||Interest is paid on monthly basis.||The frequency of interest payment depends on the deposit plan.||The interest on NSC is compounded on annual basis. Interest accumulates with original investment and is repayable at maturity.|