There are many investment options available in the market today. Investors can choose from these investment options depending on their risk appetite and investment goals. For dynamic and aggressive investors mutual funds can be a very good option to earn high returns. However, risk-averse and conservative investors may want to limit their investments in the mutual fund market. For such investors, traditional and safer investment options like FDs, government bonds, etc. may seem to be better investment options.
Post Office Monthly Income Scheme is one such scheme that is offered by the post offices in the country. This is a low-risk investment option that is easily available across India in any post office.
Post Office Monthly Income Schemes (POMIS) is a Government-backed scheme that is available at any post office. Being a government-backed scheme the investment of the individuals is quite secure without any risk of default. This scheme is a term deposit scheme that provides fixed income to the investors at regular intervals. Investors can open an account under this scheme at any post office across the country and can also transfer the same in case of a change of residence.
This scheme is available to every resident individual in India. The scheme has set certain eligibility parameters for the individuals to be eligible for the scheme. These eligibility parameters are mentioned below,
The residential status of the individuals is the first point of consideration for checking eligibility under the scheme. This scheme requires the applicants to be residents of the country. NRIs are not allowed to open an account under this scheme.
An account under this scheme can be opened in the name of minors. The minimum age required to be eligible for POMIS is 10 years. The amount accumulated under the scheme can be withdrawn when they attain the age of 18 years.
Eligible applicants can open a single account or a joint account under this scheme. The maximum eligible investment under this scheme is tabled below.
| Account type | Maximum permissible deposit amount |
| Single account | Rs. 4,50,000 |
| Joint account (up to 3 joint account holders) | Rs. 9,00,000 |
This scheme offers many features and benefits that make it an attractive investment for investors. Some of these features are mentioned below.
This scheme has set the minimum and maximum amount of investment that can be made by eligible investors. The details of the same are tabled below.
| Type of account | Minimum amount of investment | Maximum amount of investment |
| Single account | Rs. 1,500 (subsequent investment in multiples of 1,000) | Rs. 4,50,000 |
| Joint account | Rs. 1,500 (subsequent investment in multiples of 1,000) | Rs. 9,00,000 |
| Minor account | Rs. 1,500 (subsequent investment in multiples of 1,000) | Rs. 3,00,000 |
This scheme has a tenure of 5 years (60 months). The amount under the scheme can be withdrawn after the maturity of the account or can be reinvested for a further tenure of 5 years.
This scheme offers interest at a fixed rate of 6.6% per annum. This interest rate is effective for the quarter ending September 2021 and revised on a quarterly basis.
Another important feature of this scheme is the nomination facility. Investors can update nominations on this scheme by adding a beneficiary. Such beneficiaries can claim the benefits under this scheme after the death of the investor.
This scheme provides the benefit of guaranteed returns that are free from any market risks unlike returns on mutual funds. These returns are provided at fixed intervals without any risk of default.
The amount of initial investment in the scheme is assured under this scheme during the tenure of the scheme and at the time of maturity. This is a government-backed scheme so the investment is risk-free.
This scheme has the option of re-investment of the corpus fund after maturity. Investors can either withdraw the amount at the end of the tenure or re-invest the same for a further period of 5 years.
This scheme is not eligible for tax deduction under section 80C unlike other similar investment options like FDs, bank RDs, etc. This scheme however does not attract any TDS on the income earned from the scheme in the form of interest.
Another significant benefit under this plan is the ease of transferability of the investor’s account from one post office to another. There will be no break or pause in the investment under POMIS and the interest that is earned under the scheme.
Investment under POMIS is a secured investment. It is a government assured investment so the risk of default under the plan is negligible. Therefore, this plan is particularly suitable for risk-averse investors who are looking for long-term investment options that can provide fixed income at regular intervals. This scheme is especially favourable for senior citizens who can park their money in the form of a one-time investment in this secure scheme and earn regular income in the form of interest
Investors can open a POMIS account at the nearest post office from their residence. The process to open a POMIS account is offline and is detailed below
Post Office Monthly Income Scheme comes with a tenure of 5 years. However, investors can withdraw from the scheme due to any financial emergency or any other reason prior to the completion of such tenure. Such withdrawal is subject to certain penalties that are calculated based on the year of withdrawal. The details of the same are tabled below.
| Year of withdrawal | Penalty |
| Withdrawal before completion of 1 year | No benefits under POMIS |
| Withdrawal between 1st year and 3rd year | A penalty of 2% levied on withdrawal of the entire amount |
| Withdrawal between 3rd year and 5th year | A penalty of 1% levied on withdrawal of the entire amount |
POMIS and mutual funds are two different categories of investments that can cater to the needs of different types of investors. Given below are a few points that can highlight the underlying differences between these two investments.
| Category | POMIS | Mutual Fund (monthly Income scheme) |
| Nature of scheme | POMIS is a Government-backed risk-free scheme | Mutual fund Monthly Income schemes are debt oriented low-risk schemes |
| Returns | The returns under POMIS are fixed and guaranteed. The current interest rate under POMIS is 6.6% p.a. | The returns under this scheme are not fixed or guaranteed and depend on the market conditions |
| Target investors | This scheme is best suited for risk-averse investors | This scheme is best suited for risk-averse investors that want to earn relatively higher returns than traditional investment options |
| Tenure | The scheme has a minimum tenure of 5 years and can be extended for a further tenure of 5 years upon maturity | There is no fixed tenure for mutual funds investments |
| Amount to be invested | The minimum amount to be invested is Rs. 1,500 and the maximum amount to be invested is Rs. 4,50,000 (for a single account) and Rs. 9,00,000 (for joint accounts) | There is no minimum or maximum amount to be invested in the scheme |
| Penalty | Premature withdrawal is subject to a penalty of 1% to 2% depending on the year of withdrawal | There is an exit load if redeemed before the specified time. |
Here are the benefits of Post Office Monthly Income Scheme:
The table below shows changes in POMIS interest rates over the last 5 years:
| Year | Interest Rate |
|---|---|
| 2018-2019 | 7.3% |
| 2019-2020 | 7.6% |
| 2020-2022 | 6.6% |
| 2022-2023 | 6.7% |
POMIS is one of the many monthly income schemes that can be used to provide a steady income to investors. The easy accessibility of the scheme makes it quite attractive especially for the rural sector where the reach of post offices is maximum as compared to modern and dynamic investment products. This scheme is especially favourable to retired people that do not wish to invest in high risk investment products which may drain their life savings.
1. What is the minimum age required for investment in POMIS?
The minimum age required for investment in POMIS is 10 years.
2. What is the tenure of investment in POMIS?
The tenure of investment in POMIS is for a period of 5 years. Investors can reinvest in the scheme for a further block of 5 years after the maturity of the initial investment.
3. What is the current interest rate for POMIS?
The current interest rate for POMIS is 6.6% per annum for the quarter ending September 2021.
4. What are the maximum number of account holders that open a joint account of POMIS?
POMIS allows a maximum of 3 account holders to open a joint account under the scheme.
5. Can the POMIS account be transferred from one post office to another?
Yes. Investors can easily transfer their POMIS account from one post office to another without losing the benefits under the account.
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