The Post Office Monthly Income Scheme (POMIS) is a government-backed savings option for investors looking for a regular monthly income. Offered through India Post, the scheme has a five-year tenure and pays a fixed rate of interest.
It may suit senior citizens, retirees and others who want a steady source of income without taking market risks. Investors can deposit between Rs 1,000 and Rs 9 lakh and earn interest at 7.4% per annum. They do not have to wait until the account matures to receive their returns, as the interest is paid out every month and credited to their savings account.
Example:
If you invest Rs 9 lakh in the Post Office Monthly Income Scheme at an interest rate of 7.4% per annum, here is how much you can earn every month.
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Total investment: Rs 9,00,000
Annual interest rate: 7.4%
Yearly interest: Rs 66,600
Monthly interest: Rs 5,550
Investment period: 5 years
This means you will receive Rs 5,550 every month for five years.
What If You Leave The Money?
Unlike fixed deposits, post office MIS schemes do not work by reinvesting interest. This means that if you do not withdraw your monthly interest, it simply sits idle and does earn any additional interest.
To receive the monthly interest, you can link your POMIS account to a savings account. The interest will be credited to that account, from where you can easily withdraw or use the money.
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Investors should also note that simply leaving the money unwithdrawn does not save you from tax liability. Even if you do not withdraw the monthly interest, it is still treated as income earned during that financial year. This amount is fully taxable as per your applicable income tax slab. To be clear, investments in POMIS does not offer any tax-saving deductions under Section 80C of the Income Tax Act.
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