Post Office - Monthly Income Scheme in 10 points

1. The goal of Post Office Monthly Income Scheme (POMIS) is to get monthly returns in form of interests on initial investment capital.

2. One can invest a maximum of 4.5 lakhs on a single account and a maximum of 9 lakhs on a joint account. A minimum of Rs. 1000 is required to open the account.

3. Interest rates are in range of ~6.5-10%. The interest rates are decided by government for every quarter. Interests are deposited every month after end of 1st month till the maturity.

4. POMIS has a maturity period of 5 years. In case of death, the account will be closed and amount will be transferred to the nominees.

5. It is like a dividends scheme returns rather than compounding scheme i.e. once interest is deposited in your account every month, it will not get additional interest.

6. The interest earned are taxable. There are no tax benefits.

7. If you quit the scheme after 3 years, 1% of invested amount will be deducted as penalty. If you quit the scheme after 1 years, 2% of invested amount will be deducted as penalty. If you quit the scheme before 1 year, all interest earned will be deducted from initial investment.

8. Example :- Rahul invested Rs 2 lakhs in POMIS scheme in January 2015. The interest rate fix for that quarter was 8.4%, he received monthly interest of Rs. 1400 each for January, February, March month. The next quarter interest rates fall to 8%, he received monthly interest of Rs. 1330 each for April, May, June month and so on.

9. Documents :- Address Proof (Aadhar, PAN, passport, driving license), Identity proof (Aadhar, PAN, passport), KYC Form, POMIS Form.

10. Opinion :- The scheme is just like buying a house and giving it for rent, where one will receive monthly rent income. The only difference is that the value of house can go up with time, whereas your initial invested capital in POMIS will not have appreciation in value. The benefit is that returns are guaranteed. This scheme is good for investors who require income for monthly needs. Note that this scheme will not protect you from rise in inflation. Hence, this is a income creator scheme rather than wealth generator or protector scheme. If the interest earned are getting taxed for you, then definitely this is not a wise investment. As there is no compounding, no inflation protection, and every additional money earned is getting taxed. This defeats the purpose of investment.

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