Post Office Monthly Income Scheme — Complete Guide

The Post Office Monthly Income Scheme is a popular investment for Indians seeking guaranteed monthly income without exposure to market risk. With deposits backed by the government, POMIS provides security that no bank can match. ## POMIS Overview The Post Office Monthly Income Scheme offers 7.4% interest rate per annum, payable monthly. The interest is calculated on the completed quarter and paid on the first working day of the following month. For a Rs 5 lakh deposit, monthly interest is approximately Rs 3,083. POMIS has a 5-year tenure, with premature withdrawal permitted after 1 year with penalty. The minimum deposit is Rs 1,000, with maximum deposit limits of Rs 9 lakh for single accounts and Rs 15 lakh for joint accounts. These limits apply across all POMIS accounts held by an individual. ## Eligibility and Account Types POMIS can be opened by individuals above 10 years of age, with minors able to open accounts through guardians. Joint accounts can be held by up to 3 adults, with the maturity proceeds shared equally among survivors. The account can be opened at any post office with cash or cheque. The cheque must be drawn in favor of the postmaster and crossed Account Payee only. Standing instructions for automatic transfer from a savings account can be set up for those who want regular monthly contributions. ## Tax Treatment The interest from POMIS is fully taxable as per your income slab, with no indexation benefit available. TDS is deducted at source if annual interest exceeds Rs 10,000, making accurate annual tax planning essential for those with large POMIS investments. The total 7.4% return on POMIS translates to approximately 5.2% post-tax for someone in the 30% bracket. For senior citizens in the 10% bracket, the post-tax return is approximately 6.7%, making POMIS significantly more attractive for lower-income retirees. ## Comparison with Other Options Compared to bank FDs at 7-7.5% for 5-year tenures, POMIS offers similar returns with monthly interest payout rather than cumulative growth. For retirees needing regular income, POMIS's monthly cash flow is more convenient than having to manually withdraw from an FD each month. The senior citizen FD rates at 7.5-8% from banks like SBI compare favorably with POMIS. Senior citizens should compare bank FD rates carefully, as many banks offer 0.5% higher rates for those above 60, potentially exceeding POMIS returns while maintaining similar capital safety.