Post Office Monthly Income Scheme (POMIS)

The Post Office Monthly Income Scheme (POMIS) is designed for people who want a steady monthly income without taking risks. You invest a lump sum once, and the post office pays you interest every month at a fixed rate.

POMIS is widely used by investors who depend on regular payouts to manage household expenses or supplement existing income. Since the scheme is backed by the government, it offers a high level of safety and predictability, which many market-linked options do not.

This guide breaks down how POMIS works, current interest rates, eligibility rules, tax treatment, and whether it fits your income needs, so you can decide if it deserves a place in your portfolio.

What is the Post Office Monthly Income Scheme?

POMIS is a government-backed savings scheme designed for people who want a steady monthly income with low risk.

Under this scheme, you invest a lump sum amount once, and the post office pays you interest every month at a fixed rate. The principal amount remains locked in for 5 years, after which you can withdraw it or reinvest.

How Does the Post Office Monthly Income Scheme Work?

POMIS follows a simple structure: deposit once, receive interest every month, and get your principal back at maturity. Here’s how it works:

1. You deposit a lump sum amount at the post office.
2. The account runs for 5 years from the date of opening.
3. Interest is paid at the end of every month, not at the beginning.
4. The first interest payout is credited one month after account opening.

At maturity, you can withdraw the full principal or reinvest it for another 5-year term at the prevailing rate.

Eligibility criteria for investing in POMIS

You can open a POMIS account if you meet the following conditions:

• You must be a resident of Indian
• NRIs are not eligible
• Any adult can open an account
• A minor above 10 years can open an account in their own name
• A guardian can open an account on behalf of a minor
• Joint accounts are allowed with up to 3 adults

The investment limits are up to ₹9 lakh for a single account and up to ₹15 lakh for a joint account.

Also Read: What is ELSS Fund and Why to Invest in it?

Key Features and Benefits of POMIS

Here are the key features of POMIS that make it an appealing option for investors:

• Guaranteed monthly income: Once you invest, you receive interest every month at a fixed rate. The payout does not depend on market performance, which makes income planning easier. Interest is paid at the end of each month and can be credited directly to your savings account.
• Fixed maturity period with renewal option: POMIS has a lock-in period of 5 years. At maturity, you can:
  • Withdraw the entire principal, or
  • Reinvest the amount for another 5-year term at the prevailing interest rate
• Nomination facility: You can nominate a family member at the time of opening the account or later. In case of the investor’s death during the tenure, the nominee can claim the deposited amount and the interest accrued till that date. This keeps the process straightforward for dependents.

What Are the Interest Rates of POMIS?

Interest rates are a key reason why many investors consider the MIS scheme in the post office.

Current interest rate

For FY 2025–26, the interest rate for the Post Office Monthly Income Scheme is 7.40% per annum, payable monthly. This rate applies for the full 5-year term for accounts opened during the notified period.

How interest is calculated

Interest under POMIS is calculated on the principal amount and paid monthly. It does not compound. Here’s a simple example:

• Investment amount: ₹9 lakh
• Interest rate: 7.40% per annum
• Annual interest: ₹66,600
• Monthly interest: ₹5,550

The interest is credited every month. If it is not withdrawn, it does not earn additional interest.

Who Should Consider Investing in POMIS?

POMIS is not meant for everyone. It works best for investors who value income stability over high returns. You may consider the POMIS if you:

• Need a fixed monthly cash flow for expenses
• Prefer low-risk, government-backed savings options
• Do not want exposure to market ups and downs
• Are comfortable locking in money for 5 years

How to Open a POMIS Account?

Opening a POMIS account is straightforward and handled through the post office:

1. Open a Post Office savings account if you don’t already have one.
2. Visit the nearest post office and get the POMIS application form.
3. Fill in the details and choose the account type (single or joint).
4. Submit the form along with documents and photographs.
5. Make the initial deposit through cash or cheque.
6. Once processed, you’ll receive the account details and passbook.

The account opening date is considered the start date for interest calculation.

Required documents

You’ll need:

• Identity proof (Aadhaar, PAN, Passport, or similar)
• Address proof
• Two passport-size photographs
• Nomination details, if applicable

Original documents are required for verification.

Tax Implications of POMIS

Before investing in POMIS, it’s important to understand how the returns are taxed. The scheme offers income stability, but it does not come with tax advantages.

• Interest is fully taxable: The monthly interest you receive from POMIS is treated as income from other sources and is added to your total taxable income. It is taxed as per your income tax slab.
• No tax deduction on investment: The amount invested in POMIS does not qualify for deduction under Section 80C.
• No TDS deduction by default: The post office does not deduct TDS on the interest paid. However, this does not make the income tax-free. You are still required to declare the interest while filing your return.
• Impact on post-tax returns: Since the interest is taxed at slab rates, the effective return can be lower for investors in higher tax brackets.

Because of this, many investors use POMIS mainly for income needs and complement it with other options that offer growth or tax efficiency, such as Daily SIPs starting at ₹11 through Appreciate or US ETFs for long-term diversification.

Benefits of Investing in POMIS Over Other Schemes

POMIS appeals to investors who want clarity and stability from their savings. It focuses on income certainty rather than chasing higher returns.

• High level of safety: POMIS is backed by the Government of India, which keeps the principal secure until maturity.
• Predictable monthly income: Interest is paid every month at a fixed rate, making cash-flow planning simple.
• Lower volatility than market-linked options: Unlike mutual funds, returns do not fluctuate with market movements.
• Comparable to fixed deposits, but with monthly payouts: Fixed deposits usually pay interest quarterly or at maturity, while POMIS provides a steady monthly payout.
• Easy account transfer: The account can be transferred from one post office to a different one if you change cities, without additional charges.
  

Also Read: Senior Citizens Savings Scheme

Potential Drawbacks of POMIS

While POMIS offers stability, it comes with trade-offs that are important to understand upfront.

• Returns may not keep pace with inflation: The fixed interest rate can lose real value over time as living costs rise.
• No capital growth: The principal remains unchanged throughout the 5-year term, limiting long-term wealth creation.
• Restricted liquidity: Premature withdrawal is not allowed within the first year.
• Penalty on early closure: Closing the account early results in a deduction from the principal, depending on when the withdrawal is made.
• No tax-saving benefit: The investment does not qualify for deductions under Section 80C, and the interest earned is taxable.

Also Read:  How to Do Tax Planning in India

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Conclusion

The POMIS is a safe and straightforward option for investors who need regular monthly income without market exposure. It works well for meeting routine expenses and preserving capital.

However, POMIS alone may not be enough for long-term financial goals. Many investors combine it with options like Daily SIPs starting at ₹11 through Appreciate or add US ETFs to bring growth and diversification into their portfolio. This approach balances income stability with future wealth creation.

FAQs on POMIS Schemes

Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory.