The recently announced budget for 2023-24 brings good news for investors looking for secure and reliable options to park their savings. The maximum deposit limit for the monthly savings scheme at the Post Office, known as the Post Office Monthly Income Scheme (POMIS), has been enhanced significantly. It has been increased from Rs. 4.5 lakhs to Rs. 9 lakhs for a single account holder and from Rs. 9 lakhs to Rs. 15 lakhs for those who choose a joint account. This move is likely well-received by those who trust the nationalized banks and Post Offices as safe havens for their hard-earned money.
A Legacy of Trust
The Post Office has been an integral part of the Indian financial landscape, especially for the older generation, providing a sense of reliability and security in handling their finances. With branches spanning across the country, the Post Office offers a variety of savings schemes, and one such scheme that stands out is the Post Office Monthly Income Scheme (POMIS).
POMIS is a low-risk, steady-income investment option backed by the Finance Ministry, making it a highly reliable choice for risk-averse investors. Let’s delve into the various facets of this scheme.
Understanding Post Office Monthly Income Scheme (POMIS)
Investment Limit and Period: As mentioned, the maximum investment limit for POMIS has been raised to Rs. 9 lakhs for individual accounts and Rs. 15 lakhs for joint accounts. The investment tenure is set at 5 years.
Interest Rate: The current interest rate for the period of April-June 2023 stands at 7.40% per annum, payable monthly. To put it in perspective, if an investor like Mr Sharma were to invest Rs. 9 lakhs in POMIS for 5 years, he would receive a monthly interest of Rs. 5,550.
Features and Benefits
- Capital Protection: POMIS offers capital protection as it is a government-backed scheme, ensuring your money’s safety until maturity.
- Low-Risk Investment: It’s a fixed-income scheme, safeguarding your investment from market fluctuations making it a safe choice.
- Affordable Deposit Amount: With an initial investment requirement of just Rs. 1,000, it’s accessible to a wide range of investors.
- Guaranteed Returns: Investors receive monthly income in the form of interest, offering a dependable income stream.
- Tax Efficiency: POMIS investments are not covered under Section 80C, and TDS is not applicable, making it a tax-efficient option.
- Payout: Payouts are made after one month from the date of the first investment, offering flexibility.
- Multiple Account Ownership: You can open more than one POMIS account, but the total deposit amount across all accounts should not exceed the prescribed limits.
- Joint Accounts: Joint accounts can be opened with 2 or 3 account holders, allowing an aggregate deposit of up to Rs. 15 lakhs.
- Fund Movement: The recent addition of the feature to move funds to a recurring deposit (RD) account provides more options for investors.
- Nominee: Investors can nominate a beneficiary to ensure the benefits pass on in the case of the investor’s demise during the account’s term.
- Ease of Transactions: Monthly interest can be collected directly from the Post Office or transferred to your savings account. Reinvesting the interest in a SIP is also an attractive option.
- Reinvestment: After maturity, you have the option to reinvest the corpus for another 5-year term to continue earning benefits.
To open a POMIS account, you must be a resident Indian or an adult. Accounts can also be opened on behalf of minors aged 10 years and above, with the funds becoming accessible when they turn 18. Upon reaching adulthood, the minor should apply for account conversion.
How to Open a POMIS Account?
Opening a POMIS account is a straightforward process:
- Open a post office savings account if you don’t have one.
- Collect a POMIS application form from your Post Office.
- Submit the filled form with ID and residential proofs and photographs at the Post Office. Bring the originals for verification.
- Obtain the signatures of your witness or nominee(s) on the form.
- Make the initial deposit via cash or cheque. In the case of a post-dated cheque, the date on the cheque is considered the account opening date.
- Once processed, the Post Office executive will provide you with your account details.
Consequences of Early Withdrawal
The withdrawal rules for POMIS are as follows:
- Before completing one year: Zero benefits.
- Between 1st and 3rd year: Entire deposit refunded after deducting a 2% penalty.
- Between 3rd and 5th year: Entire corpus refunded with a 1% penalty.
Comparing POMIS with Other Monthly Income Plans
POMIS stands out when compared to other monthly income plans like Monthly Income Mutual Funds and Monthly Income Insurance. POMIS offers assured income at a fixed rate, while the other options are subject to market fluctuations. It also enjoys tax benefits and has a well-defined investment limit, making it suitable for those who prefer stability over high-risk options.
Who Should Invest in POMIS?
POMIS appeals to investors who prioritize security and steady returns, even though it offers limited tax benefits. If you fall into this category, now is an opportune time to consider starting a POMIS account.
POMIS Interest Rate History
Here’s a look at the interest rates for POMIS over the past 5 years:
- 1st April 2023 – 30th June 2023: 7.40%
- 1st January 2023 – 31st March 2023: 7.10%
- 1st October 2022 – 31st December 2022: 7.10%
- 1st April 2020 – 30th September 2020: 6.60%
- 1st January 2020 – 31st March 2020: 7.60%
- 1st October 2019 – 31st December 2019: 7.60%
- 1st July 2019 – 30th September 2019: 7.60%
- 1st January 2019 – 31st March 2019: 7.70%
- 1st October 2018 – 31st December 2018: 7.70%
- 1st January 2018 – 30th September 2018: 7.30%
In conclusion, the enhanced deposit limits and reliable nature of the Post Office Monthly Income Scheme make it a compelling choice for those seeking stable and secure investment options in the current financial landscape. With its long-standing reputation and government backing, POMIS is poised to continue being a favoured choice among investors looking for consistent returns without exposing themselves to market risks.
Frequently Asked Questions
1. How is the individual account holder’s share calculated in the case of a joint account?
Each joint account holder will have an equal share in each joint account.
2. What if I don’t want to withdraw the deposit amount upon the account maturity?
In case you don’t withdraw the deposit amount upon maturity, the money will stay in the account and earn a simple interest as per the Post Office Savings Account for a period of two years from the account maturity.
3. Is this scheme suitable for senior citizens?
Yes, POMIS is favourable for senior citizens as it allows them to deposit their life savings and earn interest for their monthly expenses.
4. What happens to my account if I have to move from one city to another due to work?
In the event of shifting from one city to another, you can easily transfer your POMIS account to the Post Office in the current city at no extra cost.
5. What is the POMIS investment limit in 2023?
The maximum deposit limit under POMIS is 9 lakhs for an individual account and 15 lakhs for a joint account.
6. Can the nominee withdraw the amount in the case of the death of the investor before maturity?
Yes, nominees can apply for a death claim settlement immediately upon the death of the POMIS investor, even if the 5-year lock-in period is not complete. They can claim a refund of the investment amount and the interest accumulated until the investor’s death.