Post Office Monthly Income Scheme

Post Office Monthly Income Scheme (POMIS) is undoubtedly one of the safest investment options that helps you earn decent returns without risking your savings. It might not be very well-known among urban investors, but this lesser-known monthly investment scheme offers a bouquet of benefits to the investor. The post office is undoubtedly one of the biggest banking service providers in India. It is managed by the Ministry of Finance and is regarded with greater credibility than many other investment avenues.

Monthly Income Scheme (MIS) promises the investor guaranteed returns at the interest rate of 7.7% per annum. The returns can be received as a fixed monthly income. Many experienced investors consider MIS as one of the best investment options, as it provides the following customer benefits:

• It keeps the capital intact.

• It yields better returns than other debt-based instruments.

• It ensures a fixed monthly income to the customer.

Key Features of Post Office MIS

The maturity period for the Post Office MIS is five years. Therefore, the customer should withdraw the amount after this duration and thus receive all the funds that were invested. Additionally, the customer will also receive the added benefits of a fixed monthly income for the entire duration of the scheme. In case the customer withdraws the funds before the completion of 5 years, the following benefits are payable:

• Withdrawal within 1 year - no benefits.

• Withdrawal between 1 and 3 years - Entire deposit is received after a nominal deduction of 2% as a penalty.

• Withdrawal after 3 years - Entire deposit is received after a nominal deduction of 1% as a penalty.

These are the other significant features of the scheme:

• The investment is risk-free.

• The customer is allowed to choose the nominee to receive the benefits in the event of his/her death.

• The scheme provides the option of moving the funds into a recurring deposit in order to grow the money.

• The scheme is available for minor investors too.

• The Post Office MIS account can be transferred from one post office to another without paying any additional costs.

• A separate account has to be created for every deposit made by the customer at the post office. Thus, one person can open multiple MIS accounts up to a maximum account balance limit of Rs.4.5 lakh, which is the total amount that one customer can invest including all of his/her Post Office MIS accounts.

• The maturity amount received at the end of the term can be reinvested in POMIS again.

• This scheme doesn't have TDS (Tax Deduction at Source) deduction. However, the amount earned as interests through the scheme is taxable.

• The amount invested in this scheme is not eligible for tax rebates.

• The account may be opened using a cheque or cash.

• Two or three adults may open a joint MIS account. Each account holder has an equal share. The conversion of a single account to a joint account and vice versa is also possible.

How Does It Work?

Opening a Post Office MIS account and investing in the scheme is an easy process that requires minimal documentation. The customer has to submit a copy of identity proof, address proof along with some passport size photographs. In the beginning, the customer has to open either an individual or a joint account. Then the customer can invest money according to the following rule:

• For single accounts, the investment amount can range from INR 1500 to INR 4.5 lakh.

• For single accounts, the investment amount can range from INR 1500 to INR 9 lakh.

Eligibility Criteria

The post office MIS has been specially designed for risk-averse investors who are reluctant to invest in equity instruments but are on the lookout for fixed monthly payouts. Hence, most of the investors in this scheme are usually retired, senior citizens.

• The only prerequisite for investing in this scheme is that the investor should be a resident of India.

• This scheme is not available for NRIs.

• The minimum age to invest in a POMIS is 10 years.

• A minor can invest a maximum amount of Rs. 3 lakh in POMIS.

FAQs

What happens if the customer exceeds the permitted limit of investment?

For a breach of limit, the post office asks the customer to immediately withdraw the additional amount. The investor receives savings account interest on the excess amount for the period between the deposit of the amount and its withdrawal.

What if the investor does not withdraw the amount after five years?

If the amount in the MIS account and its interest is not withdrawn after five years, then the account will earn simple interest at the savings account interest rate for up to 2 years and then the final amount will remain idle, until withdrawn.

When can the depositor appoint a nominee?

The depositors can appoint a nominee either during the initial investment or at any time during the term of the scheme. If the depositor wants to assign a nominee after opening the account, then he/she will be required to submit a formal application to the concerned post office.

What if the investor expires while the scheme is still active?

If the investor expires while the scheme is active, the nominee must close the account. The nominee cannot continue investing in the account. The deposited amount plus the accrued interest up to the preceding month is remitted to the nominee.

How is the interest payable?

POMIS interest can be payable in three ways:

1. It is automatically credited to the investor's post office savings account.

2.  The depositor can withdraw the interest every month and accordingly receive the amount either through cheque or as cash

3. The interest can also be received through post-dated cheques with the validity of 3 months from the date of issuance. This facility is applicable only if the cheque amount is more than Rs.100.

What if the interest payout date is a postal holiday?

The interest is then credited on the day preceding working day.

Is any bonus remitted at the time of maturity?

There isn't an option for bonuses paid at maturity. The accounts that were created between 8-Dec-2007 and 30-Nov-2011 had a 5% bonus offered at maturity.

What happens when one of the depositors of a joint account expires?

The account is converted to a single account after the death of one account holder. If the deposit exceeds the limit, the surviving member must withdraw it immediately.

Can the monthly interest from a POMIS account be automatically deposited to an RD account in the post office?

No, automatic deposits to RD is not possible. However, the interest can be automatically deposited to the post office savings account. The investor can then deposit it into the RD account.

Is wealth tax imposed on the amount deposited in POMIS?

No, the amount is exempt from wealth tax.

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