Post Office Monthly Income Scheme

The POMIS does one thing: it turns a lump sum into a monthly credit. The deposit runs for five years, the government guarantees interest and principal, and interest is paid every month to every investor — there is no cumulative option.

For a retiree who needs something that looks like a pay cheque, that is the attraction. The workbook lists it with the SCSS as a government-sponsored distribution-stage scheme.

Its weaknesses are the same as any fixed deposit's, plus two of its own: a low ceiling on how much can go in, and no tax benefit at all.

Limits.

A depositor may hold multiple accounts, but the aggregate across all post offices cannot exceed the maximum.

Term. 5 years. Premature withdrawal is allowed after 1 year from opening.

Rate. Announced quarterly by the Government of India to link it with market dynamics.

Tax. No tax benefits on the investment or the income.

Risks to income (Chapter 6):

• On maturity the money may have to be reinvested at a lower rate — reinvestment risk.
• The upper ceiling limits the retirement income that can be generated.
• Chapter 7 adds inflation risk: fixed income may become inadequate as costs rise.

Where it sits. Chapter 7's diversified income strategy uses POMIS, SCSS, bank deposits and rent for the regular expenses that come after essentials; the bucket strategy includes POMIS interest in Bucket 1.

A retired couple want the maximum possible monthly income from the POMIS.

Option 1 — one joint account: Rs 15,00,000. Option 2 — two single accounts: Rs 9,00,000 each, Rs 18,00,000 in total. Each spouse holds his or her own account; neither exceeds the single-account maximum.

The rate is reset quarterly, so none can be assumed from the workbook. Take 7 per cent purely for illustration:

Every rupee of that interest is taxable in their hands — the POMIS itself offers no deduction or exemption.

Five years later, the deposits mature. If the announced rate has fallen to, say, 6 per cent, the same Rs 15 lakh reinvested yields only Rs 7,500 a month. That drop is the workbook's reinvestment risk in rupees.

Chapter 2, section 2.10.4, lists the POMIS under post office schemes. Chapter 6, section 6.2.2 (Distribution Products), profiles it with its limits, term, withdrawal rule, risks and tax. Chapter 7, sections 7.3 and 7.4, give its pros and cons alongside the SCSS and place it in the diversified income strategy and Bucket 1. Chapter 8, section 8.1.4, notes joint holding and nomination. Expect recall of Rs 1,500 / Rs 9 lakh / Rs 15 lakh, the monthly payout, and the absence of tax benefits.

• Rs 9 lakh single, Rs 15 lakh joint — and the limits are aggregates across all post offices.
• No tax benefit of any kind. Unlike the SCSS, the investment earns no section 123 / Schedule XV deduction.
• Interest is monthly for all investors. There is no choice of frequency.
• Premature withdrawal after 1 year.
• The rate is announced quarterly, so the rate on a new deposit is not fixed for all time.
• Of the post office distribution products, only the POMIS has an upper investment limit in the Chapter 6 comparison — the workbook states "Except for the POMIS, there is no upper limit" (though the SCSS, profiled separately, is capped at Rs 30 lakh).
• Reinvestment risk at maturity is the defining risk; it is not a lifetime income like an annuity.