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Post Office Monthly Income Scheme

Saving is not as easy as it seems. Moreover, in this dynamic world, people are way too busy. There isn't enough time to think, and having a safe option like a saving scheme would really help. Not only does a saving plan help you gather money, but it also saves you time. The Indian Postal Service introduced one such saving scheme. It is known as the Post Office Monthly Income Scheme. It merely is an investment scheme which helps you save for the future. Post Office Monthly Income Scheme, which is a five-year investment plan, an investor is allowed to set aside a small sum of money every month.

A pre-set rate decides how much interest will an investment gather. Monthly Interest is paid out to the entitled person on a monthly basis. Post Office MIS is equally popular among the rural and urban populations. The reason behind this popularity is the reliability it provides. Post Office MIS gives a guaranteed monthly return on your investment. Also, this works as security for your future.

In simple words, under the Post Office Monthly Income Scheme, a certain amount of money is invested. This amount of money earns a definite interest every month.

Besides providing this investment scheme, the Post Office also offers many banking products and services. POMIS is extremely reliable since it is under the supervision of the Finance Ministry. The best thing about POMIS is that it produces steady income. Steady income and low risk are the two things that make it the best-suited investment plan for regular people. First, you need to invest, and this investment will continue to earn interest every month for five years. Currently, the interest rate is 7.6% per annum, payable monthly. Additionally, after five years, you are free to withdraw your saved amount from the Post Office. Alternatively, you can transfer the collected amount to your account via Electronic Clearance Service.

Features of Post Office Monthly Income Scheme

Post Office Monthly Income Scheme comes with numerous benefits. Steady income and reliability are just some of the benefits. There are many more, and a few of them are listed below:

  • Capital Protection: Being a government backed scheme, there is no chance that anything can go wrong here. The investment you make is safe with the government, and you earn interest on a monthly basis. Many people don't invest in different schemes because they are not entirely sure that the plan is reliable. However, with POMIS, you will not have to worry about anything.
  • Tenure: Under this scheme, you need to put in the money for five years. After the completion of a five-year term, you can choose to withdraw the savings. Alternatively, you can choose to reinvest it in the same scheme or some other scheme.
  • Low Risk: Market risks do not influence the investments you make under this scheme. Free from market risks means that whatever the market condition may be, your investment stays protected.
  • Minimum Investment: An individual can start his Post Office MIS account with as low as Rs. 100 and in multiples thereof. You can change the amount as and when needed. The maximum amount which an individual can invest is Rs. 4.5 lakhs. In another situation, a joint account can deposit a maximum amount of Rs. 9 lakhs. So, the post office provides you with a wide range of investment options.
  • Guaranteed Returns: With POMIS, the investment that you make continues to gather monthly interest. The best thing is that the money invested is free from all sorts of market risks. So the post office keeps your money safe and also allows your money to grow as well. This safety guarantees that you will get a good return at the time of withdrawal. It is worth noticing that the POMIS offers higher returns as compared to other investment schemes like a Fixed Deposit.
  • Tax Efficiency: There is no tax rebate available on the investment made under POMIS.
  • Single or Joint account: Post Office MIS can be opened by people individually or as a joint account. The benefit of having a joint account is that you can invest a substantial sum of money. Using a single account, you can invest a maximum of Rs. 4.5 lakhs at a time. However, through a joint account, you can invest a maximum of 9 lakhs. A more significant investment ensures a bigger return.
  • Age is not a matter of concern: You can open an account for a minor. A minor of 10 years and above age can open and operate his own account. Once the child has crossed 18 years of age, he can convert his minor account into an adult account. Early investment helps you save for the future. Saving in the name of the minor will ensure that when he grows up, he has financial stability.
  • Nominee: POMIS allows you to choose a beneficiary. The beneficiary is entitled to the saving at the time of maturity if the original investor is deceased.
  • Monthly Interest: The investment you make under POMIS gathers monthly interest, and you are eligible to withdraw it. You can either withdraw it physically from the post office or transfer it to a savings bank account on a regular basis. You can also choose to reinvest the money.
  • Shifting Post Offices: If you decide to move out of your city, you can transfer your investment from one post office to another. The smooth transaction helps you keep a close track of the progress regarding the investment, and also provides extra security. These are some of the benefits offered by the Post Office Monthly Income Scheme. Also, along with the benefits, you should also be aware of how a Post Office Monthly Income Scheme Works.

Post Office Monthly Income Scheme Benefits

Under POMIS, you invest for five years and get your monthly interests. At the end of 5 years, when you withdraw the money, you get every penny back!

Although, there are provisions to withdraw the money before the completion of 5 years. This is what might happen if you withdraw the money before the maturity period:

  • When you withdraw the money between 1-3 years, you will be charged with a penalty. A 2% deduction will be made from your investment.
  • When you withdraw the money after three years, you will be charged with a 1% penalty.

How Post Office Monthly Income Scheme Works?

It is simple to invest the POMIS. You need to present minimum documents while opening an account. You have to provide an identity proof, an address proof, and passport size photographs.

Understanding how a POMIS works is simple. The investment you make under this scheme earns interest, as per a pre-determined rate. You can choose to re-invest the money earned and gather a substantial amount. At the end of the five-year term, the original investment money goes back to the investor. There are two ways in which you can withdraw the investment sum. You can either choose to withdraw it physically from the post office. Alternatively, you can get it transferred to your savings account directly, through ECS. For the monthly interest, you can choose to withdraw it every month. Alternatively, you can let it accumulate and withdraw it on maturity. Keep in mind that you should not withdraw the original investment money before the completion of a full term of 5 years. In case you withdraw, you will be liable to pay a penalty. As mentioned earlier, you can choose to invest the interest further. POMIS allows you to invest the money under a recurring deposit. This way, the money is not dormant anymore and will continue to earn interest.

How to Open a Post Office Monthly Income Scheme?

To start saving under the Post Office Monthly Income Scheme, first, you need to open an account in the post office. Once you have opened the account, you need to provide a few documents for identification. You need to present a valid ID proof, address proof, and a passport size pictures. You can use a Passport, Voter ID, PAN Card, or Aadhaar for identification and address proof.

Now you can start investing in this scheme. Under a single account, you can invest anywhere between Rs. 100 and Rs. 4.5 lakhs. However, if you want to make a more significant investment, it is best to go for a joint account. You can make a joint investment with a maximum of Rs. 9 lakh. Also, a more significant investment means better interest. One can easily withdraw this interest every month. An adult can open an account under the POMIS, for a minor. Once of age, a minor can convert his account into an adult account. The adult might also choose to withdraw the money once the investment period is over.

The investor can claim the interest monthly. He can choose to withdraw it, or else he can let it gather. However, in either case, the interest money shall remain dormant. It won't collect any additional benefits. The money will keep piling up, and you can withdraw it at your convenience. However, if you want something more, the Post Office offers services that allow you to put the interest money into a recurring deposit scheme. This way, your interest will gather more interest!

To accept the income scheme, you barely need anything, and the benefits are quite captivating. POMIS comes with a low risk and high security. In addition to this, it provides you with higher interest as compared to other investment schemes.

FAQs on Post Office Monthly Income Scheme

What Makes Post Office Monthly Income Scheme a great investment?

It is a concerning factor that most people are confused between the Monthly Income Scheme and Monthly Income Plan. Also, in some ways, people are unable to draw a line between Mutual funds, Insurances, and POMIS. POMIS is way different from Monthly Income Plans. Monthly income under POMIS are 100% guaranteed. Whereas in the case of Mutual fund, it is not sure how much return you will get. Alternatively, if you will get a profit or not, the monthly income that an investor gets depends on the return earned, whereas the monthly income which comes via Insurance is fixed and guaranteed.

Post Office Monthly Income Scheme is the best plan for people who are not willing to take risks, whereas Mutual Funds are risky. Market risks influence the value of your investment. This is the reason why mutual funds may or may not produce monthly income. Mutual funds are best for people who are very much worried about having a safety net. They believe in taking risks and making the best of it. POMIS has a limit on the amount that you can invest in this scheme, whereas there is no such obligation when it comes to Mutual Funds and Insurances. However, it may be very appealing that Mutual Funds offer higher returns. However, they come with risks.

Is the Monthly Income Scheme in Post Office taxable?

The investments which you make under the Post Office Monthly Income Scheme do not fall under Section 80 C of the Income Tax Act, 1961. Therefore, it is evident that the amount is taxable. Taxes can be applied to the sum which you withdraw at the end of the tenure of 5 years. However, there is no TDS deducted by the post office.

Which is the best monthly income scheme?

No doubt, POMIS is the best investment plan for people easing into a more settled life phase. The best thing about POMIS is security and reliability. At the end of 5 years, you will definitely get the original investment back. There is no doubt regarding this. Also, your investment will continue gathering interest for five years. You can direct this monthly interest towards a recurring deposit. This further ensures that your interest doesn't stay dormant. At the end of 5 years, you will get the original sum of money back. The Monthly Investment Scheme offered by the post office can act as a fantastic safety net. It provides better interest compared to other fixed deposit schemes. Moreover, your money is far away from market risks. This means that no matter what, you will continue to gather interest. Although the returns offered on Mutual Funds is way more than POMIS, the risk of failure is not involved here. You get decent returns, and you get more savings done! Also, for investing in a government body, you get capital protection. Besides this, POMIS allows a minor to have an account and operate it. Parents can open POMIS for their child. Over the years, this POMIS gathers interest for your child. Early investment means that your child gets more money when the investment matures. What more can someone ask from a saving scheme? POMIS is the best because it caters to every need of the investor and has simple plans for them.