Guide
Post Office Monthly Income Scheme: a fixed monthly payout and an untouched principal
Some savers do not want growth; they want a monthly payment they can count on, with the capital intact at the end. The Post Office Monthly Income Scheme was designed for that. You deposit a sum, you receive interest each month for five years, and your deposit is returned in full at the end. The scheme is backed by the government and the rate is reviewed every quarter, but the rate on your account stays as it was when you opened it.
The calculation
Monthly income = deposit × yearly rate ÷ 12. It is simple interest paid out, with nothing added to the balance. For a deposit of 9,00,000 at 7.4% the payment is 5,550 a month, 66,600 a year and 3,33,000 over five years. At the end of the term the 9,00,000 comes back. If you want to see how a different rate or term changes the figures, change the inputs; the results follow immediately.
A worked example
The default is the single-account maximum, 9,00,000 at 7.4% for 5 years. The page shows a monthly income of 5,550.00, a yearly income of 66,600, total interest of 3,33,000 and a principal returned of 9,00,000. The return per year on the deposit is 7.40%. A joint-account deposit of 15,00,000 pays 9,250 a month, 1,11,000 a year and 5,55,000 over five years. With a tax rate entered in the box, the page also shows the monthly income after tax; at 30 percent the 5,550 becomes 3,885.
Reinvesting the income
Because the income is paid monthly, you can put it to work. If each month’s payment is reinvested at the same 7.4% rate compounded monthly, the effective yearly return is 7.66%, which the page shows. This is the yield on the deposit if you do not spend the income. The scheme does not reinvest it for you, so the figure applies only if you choose to save the payments, for example in a recurring deposit.
Tax
The interest is taxable at your slab rate. Whether tax is deducted before you receive it is a question for the post office; either way you must report the interest in your return. For a retiree in a low slab or with income below the taxable limit, the after-tax income is nearly the full amount. For a taxpayer in a high slab, a substantial part goes to tax, so use the tax field to see the net income. The scheme does not give a deduction under section 80C.
Choosing between schemes
The POMIS pays monthly; the Senior Citizens Savings Scheme pays quarterly to people who qualify by age; a bank FD can pay monthly, quarterly or at maturity, with rates that vary by bank. The best choice depends on whether you need monthly cash, your age and your tax situation. Put the rates in each calculator and compare the after-tax income.
Edge cases
A deposit above the joint limit is rejected. The term is a whole number of years from 1 to 10, although the scheme runs for five years. A rate of zero pays nothing. The page does not model early closure, where a deduction is made from the principal.
Limits
The rate is constant for the term, as it is in the scheme once your account is open. Limits on deposits per person and across accounts change over time, so confirm them at the post office. The page is an estimator; the post office’s records decide the actual payments.
Related tools
- SCSS Calculator covers the quarterly scheme for senior citizens.
- FD Calculator shows a bank deposit that compounds instead of paying out.
- RD Calculator values a recurring deposit in which you could save the monthly income.
- NSC and KVP Calculator shows post office certificates that pay at maturity.
Checked against the current version of the POMIS Calculator on .