Post Office Monthly Income Scheme (POMIS) Explained: Interest Rate, Limits and How to Open an Account

Post Office Monthly Income Scheme (POMIS) is one of India's oldest small-savings products, and one of the simplest: you deposit a lump sum once, and the post office pays you a fixed amount every month for five years, with your original deposit returned in full at maturity. No market risk, no fluctuating payout, no reinvestment decisions to make along the way — which is exactly why it remains popular with retirees, homemakers and anyone who wants a predictable monthly top-up to their income without touching their principal.

What POMIS actually is

POMIS is a fixed-tenure deposit scheme run through India Post, backed by the Ministry of Finance's National Savings Institute framework — the same institutional umbrella that runs PPF, NSC, KVP and SCSS. You deposit a lump sum for a fixed 5-year term. The post office calculates interest on that deposit at the scheme's current annual rate and pays it out to you every month, straight into a linked savings account, rather than compounding it and paying it all at the end. At the end of 5 years, you get your original deposit back in full — the monthly payments were pure interest, not a drawdown of principal.

This is the core distinction that trips people up when they first compare POMIS to a bank fixed deposit: an FD typically lets interest compound and pays out at maturity (or lets you choose a monthly-payout FD variant), while POMIS is built around monthly payout as its default, entire purpose. If you need income now — to cover a monthly expense, supplement a pension, or fund a recurring cost — POMIS is structured for exactly that from day one.

Interest rate and how the monthly payout is calculated

POMIS's interest rate is set by the government and revised quarterly, in the same review cycle as PPF, NSC, KVP and SCSS. Because it changes periodically, always check the current rate on the official India Post website or at your local post office before opening an account — don't rely on a rate you saw quoted somewhere months ago.

The payout math itself is straightforward: your monthly income is simply your deposit multiplied by the annual rate, divided by 12. For example, if the current annual rate were 7.4% and you deposited ₹9,00,000 (the maximum for a single account), your monthly payout would be ₹9,00,000 × 7.4% ÷ 12 — worked out to the nearest rupee and credited to your linked account on a fixed date each month. Because rates move, it's worth re-running this calculation with whatever rate is current whenever you're deciding how much to deposit, rather than assuming a rate you calculated with last year still applies.

Investment limits

• Single account: maximum deposit of ₹9,00,000.
• Joint account (2 or 3 holders): maximum deposit of ₹15,00,000, regardless of how many joint holders are on the account.
• Minimum deposit to open an account: ₹1,000, in multiples of ₹100 thereafter.
• An individual can hold multiple POMIS accounts, but the combined balance across all accounts (single and their share of joint accounts) cannot exceed the ₹9,00,000 individual ceiling.

That last point catches people who open a single account and a joint account separately, assuming the limits are independent — they aren't. Your total exposure across every POMIS account you hold, including your proportional share of joint accounts, is capped at the individual ceiling. Post offices do check this during account opening, and exceeding it (typically discovered later) means the excess doesn't earn interest and has to be refunded.

Who can open a POMIS account

• Any resident individual Indian citizen, in a single or joint (up to 3 holders) account.
• A guardian can open an account on behalf of a minor above 10 years old, or fully on behalf of a minor below 10.
• NRIs cannot open a new POMIS account. An account opened while resident that later becomes NRI status must typically be closed, since continued NRI holding isn't permitted under the scheme's terms.
• Trusts and HUFs (Hindu Undivided Families) are not eligible to open POMIS accounts — this is an individual-only scheme.

Documents you'll need

• Aadhaar card, for KYC and identity verification.
• PAN card — mandatory, since POMIS deposits above a threshold require PAN, and most post offices now ask for it at account opening regardless of deposit size to avoid a later compliance gap.
• Passport-size photograph.
• Address proof, if not already on file at that post office from an existing account.
• A savings account (post office or bank) to link for the monthly interest credit — POMIS pays out by transfer, not in cash.

Step-by-step: how to open a POMIS account

1. Visit your nearest post office (POMIS is currently a post-office-only scheme, not available through banks).
2. Fill out the POMIS account opening form and submit your KYC documents (Aadhaar, PAN, photo, address proof).
3. Decide your deposit amount within the single or joint account limits, and make the deposit — by cheque or transfer from a linked account, since large cash deposits may face restrictions.
4. Link a savings account (post office or bank) for the monthly interest credit, and confirm the payout date the post office assigns to your account.
5. Collect your passbook, which records the account details, deposit amount and payout schedule.
6. Add or update nominee details at opening, or shortly after — this determines who receives the account in the event of the holder's death.

Premature closure — what actually happens if you need the money early

POMIS has a fixed 5-year tenure, but the scheme does allow premature closure, with a penalty that scales with how early you close it. Closing between 1 and 3 years typically forfeits a percentage of the deposit as a penalty; closing between 3 and 5 years forfeits a smaller percentage. Closing within the first year isn't permitted at all except in specific circumstances such as the account holder's death. The exact current penalty percentages are set by the scheme and are worth confirming at your post office before deciding to close early, since they're structured as deductions from the principal, not just a loss of future interest.

This penalty structure is the main reason POMIS suits money you're confident you won't need for the full 5 years — it isn't designed as a flexible emergency fund, even though early exit is technically possible.

Tax treatment

POMIS offers no Section 80C deduction on the deposit — unlike PPF or NSC, putting money into POMIS doesn't reduce your taxable income. The monthly interest you receive is fully taxable, added to your total income and taxed at your applicable income-tax slab rate. There's also no TDS deducted by the post office on POMIS interest, which is a point that surprises some depositors into thinking the income is tax-free — it isn't; you're responsible for declaring it and paying tax on it yourself when you file your return.

This makes POMIS most tax-efficient for someone in a lower tax bracket — a retiree with limited other taxable income, for instance — since the interest is added to their income at whatever slab they're already in, without an extra TDS deduction complicating cash flow along the way.

POMIS vs other post office and bank options

It's worth being clear-eyed about what POMIS is optimised for versus its closest alternatives. Against a bank fixed deposit, POMIS's main edge is the sovereign guarantee (a government scheme rather than a bank's own credit) and a rate that's often competitive with, though not always higher than, bank FD rates — but POMIS locks you into monthly payout by design, while a bank FD gives you the choice of monthly, quarterly, or cumulative payout.

Against the Senior Citizen Savings Scheme, POMIS has no age restriction — anyone can open one — but SCSS typically carries a meaningfully higher interest rate specifically because it's restricted to seniors, so someone who qualifies for both should compare current rates rather than assuming POMIS is always the simpler or better choice.

Against NSC or KVP, the comparison is really about cash-flow need versus growth: NSC and KVP compound and pay out at maturity, growing your money faster in total terms since interest earns interest, while POMIS trades that compounding for a steady monthly cheque starting immediately. Someone who needs income now chooses POMIS; someone building a lump sum for a future goal usually does better with NSC or KVP's compounding structure.

Common mistakes people make with POMIS

• Assuming the interest is tax-free because there's no TDS — it's fully taxable, and the responsibility to declare and pay tax on it sits with the depositor.
• Opening a single account and a joint account without realising the combined ceiling applies across both, then having the excess deposit refunded without interest.
• Closing prematurely within the first year expecting only a small penalty, when early closure inside year one usually isn't permitted at all except in specific circumstances.
• Not linking a stable, long-term savings account for the monthly credit, then dealing with missed or delayed payouts after switching banks without updating POMIS records.
• Choosing POMIS purely for the monthly cheque without comparing the current rate against SCSS (if age-eligible) or a bank FD, since rates move quarterly and the 'best' option today may not be maximally efficient a year from now.

Single account or joint account — which should you choose?

The choice isn't just about the higher ₹15,00,000 ceiling a joint account allows. In a joint POMIS account, the monthly interest is by default divided equally among the holders for tax purposes, regardless of who actually contributed the deposit — each joint holder reports their share as their own taxable income. For a couple where one spouse is in a much lower tax bracket than the other, this can matter: splitting the interest income across two returns instead of concentrating it in one can reduce the total tax paid on the same monthly payout, compared to the higher earner holding an equivalent single account alone. It's worth running this comparison with your own numbers (or a tax advisor) before deciding, rather than defaulting to whichever account type is more convenient to open.

A joint account also has a practical downside worth weighing: any joint holder can typically operate the account (subject to the mode of operation chosen at opening — 'either or survivor' vs 'jointly'), which matters for households where one person wants sole control over withdrawal instructions even while sharing the deposit.

Nomination and what happens if the account holder dies before maturity

POMIS accounts require a nominee to be registered — ideally at account opening, though it can be added or updated later at the same post office. On the death of a single account holder, the nominee (or legal heir, if no nominee was registered) can claim the account, and the process is generally to close it and transfer the proceeds rather than continue the monthly payouts to the nominee under the original holder's name. On the death of one holder in a joint account, the account typically continues in the name of the surviving holder(s) rather than being closed outright, following the mode of operation registered at opening.

Keeping nominee details current is a small step that avoids a genuinely difficult process for a family later — a POMIS account without a valid nominee on file at the time of the holder's death can mean a longer legal-heir verification process before the post office releases the funds, exactly when the family least wants that friction.

Using POMIS as one layer of a retirement income plan

POMIS is rarely the only income source in a well-built retirement plan — it's most useful as one predictable layer alongside others. A common approach among retirees is to ladder POMIS against the Senior Citizen Savings Scheme and a monthly-payout bank FD: since POMIS has a 5-year tenure and SCSS also runs 5 years (extendable), staggering when each was opened means maturities and any reinvestment decisions don't all land in the same year, and the household isn't dependent on a single scheme's current rate for its entire fixed-income allocation. None of this changes the mechanics described above — it's simply a reminder that POMIS's real value shows up as part of a broader, diversified income structure, not as a standalone retirement plan on its own.

Is POMIS worth it?

For its specific purpose — a guaranteed, government-backed monthly income stream from a lump sum you don't need to touch for 5 years — POMIS remains a genuinely useful, low-friction product, especially for people who value payout certainty over maximising total return. It isn't a tax-saving instrument, it isn't a growth instrument, and it isn't meant to be either. Compare its current rate against SCSS (if you qualify by age) and against monthly-payout bank FDs before committing a large sum, since the better option changes as rates move — but for anyone who specifically wants monthly cash flow with zero market risk, POMIS does exactly what it says on the tin.