What Is the Post Office Monthly Income Scheme (POMIS)?
The Post Office Monthly Income Scheme (POMIS) is a government-backed savings instrument that provides a guaranteed monthly income on a lump sum deposit. It is one of the most popular schemes among retirees and conservative investors in India who need regular cash flow without any market risk. The current interest rate is 7.4% per annum, paid monthly, with a 5-year maturity period.
POMIS is offered through India Post (post offices) across the country. The maximum deposit limit is Rs 9 lakh for a single account and Rs 15 lakh for a joint account (with up to 3 joint holders). The minimum investment is Rs 1,000 in multiples of Rs 1,000. Interest is calculated as simple interest and credited to the depositor's post office savings account on a monthly basis.
How POMIS Monthly Income Works
Unlike fixed deposits where interest can be compounded, POMIS pays simple interest every month. The monthly payout is calculated as: Deposit Amount multiplied by Annual Rate divided by 12. For example, a deposit of Rs 9 lakh at 7.4% yields Rs 5,550 per month (Rs 66,600 per year). The principal is returned intact at the end of the 5-year tenure.
The monthly interest is auto-credited to your post office savings account (which earns 4% interest on its own balance). If you open a POMIS account, you must also maintain a savings account at the same post office for receiving the monthly interest payouts. Some depositors choose to reinvest the monthly POMIS payout into a Recurring Deposit (RD) to create a compounding effect manually.
POMIS vs Bank FD Monthly Interest
Many banks offer monthly interest payout FDs, but POMIS has distinct advantages. First, the 7.4% rate is higher than what most banks offer for monthly payout FDs (typically 6.5-7%). Second, POMIS carries sovereign guarantee since it is a government scheme, while bank FDs are insured only up to Rs 5 lakh under DICGC. Third, POMIS requires no credit risk assessment, making it accessible to everyone regardless of their banking relationship.
However, bank FDs offer more flexibility in tenure (7 days to 10 years), whereas POMIS has a fixed 5-year term. FDs also allow premature withdrawal with a small penalty, while POMIS has stricter premature closure rules.
Tax Treatment of POMIS
POMIS interest is fully taxable at the depositor's applicable income tax slab rate. There is no Section 80C deduction available on POMIS deposits, unlike PPF, NSC, or SCSS. However, no TDS is deducted by the post office on POMIS interest since it is paid monthly (TDS applies only to interest exceeding Rs 40,000 annually on post office time deposits, and POMIS is categorised differently).
Premature Closure Rules
POMIS accounts cannot be closed within the first year. After one year but before three years, a deduction of 2% of the deposit is levied. After three years but before maturity (5 years), the deduction is 1% of the deposit. On maturity, the full principal is returned along with the final month's interest. Accounts can be extended for another 5 years by redepositing at the post office.
POMIS Strategy for Maximum Income
A husband and wife can each open individual POMIS accounts with Rs 9 lakh each, plus a joint account with Rs 15 lakh. This gives a combined deposit of Rs 33 lakh, generating approximately Rs 20,350 per month in guaranteed income. For retirees, this strategy, combined with SCSS (Rs 30 lakh each for both spouses), can create a monthly income stream exceeding Rs 60,000 with zero market risk.