Nilanjan
The Post Office has long been a trusted institution for generations, serving as a reliable place for financial transactions and investments. Among the various savings schemes it offers, the Post Office Monthly Income Scheme (POMIS) stands out as a secure and lucrative option for those seeking stable returns on their investments.
In this article, we will delve into the details of POMIS, exploring its features, benefits, eligibility criteria, and much more.
What is the Post Office Monthly Income Scheme (POMIS)?
POMIS is one of the many financial products and services offered by the Post Office, under the oversight of the Finance Ministry. It is a low-risk Monthly Income Scheme (MIS) designed to provide a steady source of income for investors. With a maximum deposit limit of Rs. 9 lakhs for individual accounts and Rs. 15 lakhs for joint accounts, the investment period is fixed at 5 years. The primary goal of POMIS is capital protection, and the current interest rate for April-June 2023 stands at 7.40% per annum, payable on a monthly basis.
For instance, let’s consider Mr. Sharma, who has invested Rs. 9 lakhs in the POMIS for 5 years at an interest rate of 7.40% p.a. He will receive a monthly interest of Rs. 5,550 for the entire investment period. Upon maturity, he can withdraw the principal amount of Rs. 9 lakhs along with the accumulated interest from any post office or transfer it to his savings account via Electronic Clearance Service (ECS). Alternatively, he may choose to renew the account for another term.
Features and Benefits of POMIS
- Capital Protection: POMIS is a government-backed scheme, ensuring the safety of your investment until maturity.
- Tenure: The lock-in period for POMIS is 5 years, during which you can choose to withdraw your investment or reinvest it.
- Low-Risk Investment: As a fixed income scheme, POMIS is not subject to market risks, making it a secure investment option.
- Affordable Deposit Amount: You can start with a nominal initial investment of Rs. 1,000 and invest in multiples of this amount, depending on your financial capacity.
- Guaranteed Returns: Investors receive monthly interest payments, offering stable returns. While not inflation-beating, these returns are competitive with other fixed-income investments like Fixed Deposits (FDs).
- Tax-Efficiency: POMIS investments do not qualify for Section 80C tax benefits, and there is no Tax Deducted at Source (TDS) applied.
- Payout: The first payout is received one month after the initial investment, not at the beginning of each month.
- Multiple Account Ownership: You can open more than one POMIS account in your name, as long as the total deposit amount across all accounts does not exceed Rs. 9 lakhs.
- Joint Account: Joint accounts can be opened with 2 or 3 individuals, allowing for a maximum total deposit of Rs. 15 lakhs.
- Fund Movement: Investors can transfer funds to a recurring deposit (RD) account, a recent addition to Post Office services.
- Nominee: You can nominate a beneficiary (usually a family member) to claim the benefits and corpus in the event of the investor’s passing during the account’s term.
- Ease of Money/Interest Transaction: Monthly interest can be collected directly from the post office or automatically transferred to your savings account. Reinvesting the interest in a Systematic Investment Plan (SIP) is also a viable option.
- Reinvestment: After maturity, you may reinvest the corpus in the same scheme for another 5-year term to continue earning benefits.
Eligibility Criteria for Opening a POMIS Account
- Only resident Indians can open a POMIS account. NRIs are not eligible.
- Any adult can open a POMIS account.
- Accounts can be opened on behalf of minors aged 10 years and above. They can access the funds when they turn 18, and the account can be converted into their name at that time.
How to Open a POMIS Account?
Opening a POMIS account is a straightforward process:
- If you don’t already have one, open a post office savings account.
- Collect a POMIS application form from your nearest Post Office branch.
- Submit the duly filled form, along with photocopies of your ID and residential proofs, and 2 passport-size photos. Ensure you have the originals for verification.
- Get the witness or nominee’s signatures on the form.
- Make the initial deposit via cash or cheque, with the date on the cheque marking the account opening date.
- Once the processing is complete, the Post Office executive will provide you with the details of your newly opened account.
Consequences of Early Withdrawal
If you decide to withdraw your POMIS before the maturity period, there are penalties involved:
- Before completing one year: Zero benefits
- Between the 1st and 3rd year: Entire deposit refunded after a 2% penalty
- Between the 3rd and 5th year: Entire corpus refunded with a 1% penalty
Comparing POMIS with Other Monthly Income Plans
To make an informed decision, it’s essential to compare POMIS with alternative monthly income options:
- POMIS: Offers assured income at an annual rate of 7.40%, no TDS, and a maximum deposit limit of Rs. 9 lakhs for individual accounts and Rs. 15 lakhs for joint accounts.
- Monthly Income Mutual Fund: Invested in a 20:80 equity-debt ratio, which means no guaranteed income, TDS applied, and no specific investment limit.
- Monthly Income Insurance: Provides monthly annuities with rates varying based on premiums and the period, is taxable, and doesn’t have an investment limit.
Who Should Invest in POMIS?
POMIS is an attractive option for risk-averse investors seeking secure and reliable returns, albeit with limited tax benefits. If you fall into this category, consider exploring the Post Office Monthly Income Scheme as a viable investment option.
POMIS Interest Rate – Past 5 Years
- 1st April 2023 – 30th June 2023: 7.40%
- 1st January 2023 – 31st March 2023: 7.10%
- 1st October 2022 – 31st December 2022: 7.10%
- 1st April 2020 – 30th September 2020: 6.60%
- 1st January 2020 – 31st March 2020: 7.60%
- 1st October 2019 – 31st December 2019: 7.60%
- 1st July 2019 – 30th September 2019: 7.60%
- 1st January 2019 – 31st March 2019: 7.70%
- 1st October 2018 – 31st December 2018:
Conclusion
The Post Office Monthly Income Scheme (POMIS) represents a tried and tested avenue for secure and reliable investment, a refuge for risk-averse individuals who seek stability and consistent returns. As we’ve explored, POMIS offers several enticing features, including capital protection, a low-risk profile, and the convenience of regular monthly payouts. With a maximum deposit limit of Rs. 9 lakhs for individual accounts and Rs. 15 lakhs for joint accounts, it caters to a wide range of investors.
Over the past five years, POMIS has consistently provided competitive interest rates, making it an attractive choice for those who prioritize capital preservation and steady income over the vagaries of market investments. Additionally, the tax-efficient nature of POMIS and the flexibility it offers in terms of fund movement and reinvestment make it a compelling option for long-term financial planning.
However, it’s important to remember that early withdrawals from POMIS can incur penalties, so it’s best suited for those who can commit to the full 5-year term. To make a well-informed investment decision, it’s wise to compare POMIS with other monthly income options and consider your financial goals and risk tolerance.
The Post Office Monthly Income Scheme stands as a beacon of reliability in the world of financial investments. If you are seeking an avenue for consistent, secure, and hassle-free returns, POMIS could be the right choice for your financial portfolio. As always, before making any investment, it’s advisable to consult with a financial advisor to ensure that your choice aligns with your unique financial goals and circumstances.
