Amidst the uncertain fluctuations of the stock market and the market risk of mutual funds, if you want a fixed and secure monthly income without any financial risk on your hard-earned money, then small savings schemes of the post office are still the most reliable option in the country. 'Post Office Monthly Income Scheme' (Post Office MIS / POMIS), operated under the Ministry of Communications, Government of India, has emerged as a very popular investment vehicle among middle class families, senior citizens and retired employees. The biggest feature of this government scheme is that in this you have to deposit a lump sum only once and after that, every month for the next 5 years, a fixed amount keeps coming directly into your bank or post office savings account like pension. If an investor opens a joint account with his spouse or a family member, he can ensure regular earnings of full ₹ 9,250 every month without any tension. Complete mathematics of 7.4% interest rate and monthly income of ₹ 9,250 The returns received in the Post Office Monthly Income Scheme are guaranteed by the Central Government itself, hence there is zero risk of loss of principal amount. At present an attractive interest rate of 7.4 percent per annum is being given on this scheme by the Finance Ministry. This interest is calculated on an annual basis, but is paid to the investor in 12 equal installments per month. The mathematical analysis of the monthly income under the scheme is as follows: Maximum joint investment: ₹15,00,000 (Rs fifteen lakhs) Applicable annual interest rate: 7.4% per annum Total annual interest: $15,00,000 \times 7.4\% = ₹1,11,000$ Monthly interest (amount received every month): $\frac{1,11,000}{12} = ₹9,250$ Thus, if a family invests in the scheme up to the maximum limit, it will receive a total net interest income of ₹5,55,000 ($9,250 \times 60 \text{ months}$) during the entire tenure of 5 years and ₹15 lakh of the principal amount deposited will also be 100% refunded on completion of 5 years maturity. Single vs Joint Account: How much can you invest in which? Post Office Monthly Income Scheme offers two types of account opening facilities depending on individual needs: Single Account: If an individual opens an account in his/her name alone, he/she can deposit a minimum of ₹1,000 and a maximum of ₹9,00,000. A maximum investment of ₹9 lakh gives a monthly interest income of ₹5,550 every month at a rate of 7.4%. Joint Account: Under this scheme, maximum three adults can open a joint account. The maximum investment limit in joint account has been fixed at ₹15,00,000. In this account, all the account holders are considered to have equal share in the deposited amount and a maximum of ₹ 9,250 per month is paid on this account. Account in the name of a minor: An account can also be opened by a guardian in the name of a minor above 10 years of age, with a maximum investment limit of ₹ 3 lakh. 5 year maturity and strict rules for pre-mature withdrawal The official maturity period of Post Office MIS account has been fixed at 5 years (60 months). On completion of five years, you can withdraw the principal amount or continue the investment by opening a new MIS account based on the interest rates applicable at that time. If in an emergency you need to withdraw money before 5 years, the post office allows pre-mature closure with certain conditions and penalties: Before 1 year: Not a single rupee of the deposit can be withdrawn before the completion of 1 year from the date of account opening. Withdrawal between 1 year to 3 years: If the account is closed after completion of 1 year and before 3 years, 2 percent of the principal amount is deducted and the remaining amount is returned. Withdrawal between 3 years to 5 years: If the account is closed after completion of 3 years and before 5 years, 1 percent is deducted from the principal amount. Tax Rules and Easy Facility of Auto-Credit of Monthly Interest Investors should also clearly understand the tax provisions and payment system of this scheme: Income Tax Rules: No tax exemption is available under Section 80C of the Income Tax Act on investments made in Post Office MIS. Additionally, the interest of ₹9,250 received every month is added to the taxpayer's total annual income under the head 'Income from Other Sources' and is taxed as per the investor's respective income tax slab. Relief from TDS: No Tax Deducted at Source (TDS) is deducted on the monthly interest paid by the post office, but the taxpayer is required to self-declare this income in his Income Tax Return (ITR). Auto-Credit and RD Linkage Facility: No need to go to the post office to collect the interest received every month. Investors can get it transferred directly to their post office savings account or bank account through Electronic Clearing Service (ECS/NACH). Additionally, if you don't need that much money every month, you can also earn double the benefit of compound interest by opening a 5-year 'Recurring Deposit' (RD) account with the post office on that ₹9,250 monthly interest. How to open POMIS account in post office? Step-by-Step Process: This account can be opened very easily offline by visiting any nearest post office in the country: Go to your nearest post office (Head Post Office or Sub Post Office) and get the application form for 'National Savings Monthly Income Account'. Fill the form carefully with all personal details, account type (Single/Joint) and nominee name. Enclose self-attested copies of Aadhar Card, PAN Card and passport size photograph for proof of identity and address. Pay the amount to be invested through check or cash (cheque is mandatory for larger amounts). As soon as the account is opened, a passbook will be issued by the post office, in which the principal amount deposited, monthly interest payable and date of payment will be recorded. For which investors is this government scheme most suitable? Post Office Monthly Income Scheme is a great financial tool for all those who want to meet the household expenses, children's tuition fees, regular medicine bills of the elderly or utility expenses every month without any mental stress. This scheme is considered to be the most powerful and safe option especially for retired employees to create a parallel pension system by converting a part of gratuity or PF into a safe investment.
