Post Office Monthly Income Scheme

Here is the part most pages skip. The interest does not compound. It leaves the scheme every month. So POMIS is an income product, not a growth product, and using it as a savings plan quietly costs you money.

What does POMIS actually pay each month?

The monthly figure is simple arithmetic. Take the deposit, apply 7.4%, divide by twelve.

Rate as of 1 July 2026, from the Ministry of Finance quarterly notification for small savings. Rates are reset every quarter. The rate on your account is the one that applied when you opened it.

Look at the top row of that table. A single account at the full cap gives ₹5,550 a month. That is useful support. It is not a pension. Anyone planning to live on POMIS alone should see that number clearly before they plan around it.

What are the deposit limits and the tenure?

A joint account can be held by up to three adults. The higher cap is the main reason couples use it. Each holder has an equal share in the deposit, whoever paid for it.

Premature closure is allowed after the first year, but a penalty is deducted from your principal. The penalty falls the longer you have held the account. We could not open the Department of Posts page to verify the current percentages. Confirm them at the post office before you close early. Do not trust a figure from a comparison site.

Is the interest from POMIS taxable?

Yes, fully, at your slab rate. There is no exemption on it. That single fact decides whether the product suits you.

In the 30% bracket, 7.4% nets about 5.18%. In the 5% bracket it nets about 7.03%. The scheme is built for retired people and low-income households, and the tax treatment matches that. High earners get much less out of it than the headline suggests.

Senior citizens have a further advantage. Section 80TTB allows a deduction of up to ₹50,000 on interest income under the old regime. For many POMIS holders that covers most of the interest.

The interest is not tax-free just because no tax was withheld. Declare it under income from other sources when you file.

Why does it matter that the interest does not compound?

Every month the interest lands in your savings account. It stops earning at 7.4% the moment it does.

Leave it in a savings account and it earns perhaps 3%. Over five years on a ₹9,00,000 deposit, that gap is real money. If you do not need the monthly cash, the honest answer is that POMIS is the wrong product for you.

The post office does allow the payout to be routed into a linked account automatically. Some savers set up a recurring deposit fed by that payout. That rebuilds the compounding by hand. It works, but it is a workaround for a design choice, not a feature.

If growth is what you want, a plain cumulative deposit compounds on its own. Our best FD rates page tracks what banks currently pay.

What else pays a monthly income?

POMIS has real competition, and it is worth naming it honestly.

POMIS wins on one thing: it is backed by the Government of India with no insurance limit to think about. There is no ₹5 lakh ceiling on the guarantee, as there is with a bank deposit.

Who should open a POMIS account?

It fits a narrow, real group. Retired people who need a fixed monthly cheque. Households with idle cash and no appetite for risk. Anyone in a low tax bracket who values certainty over return.

It fits badly if you are salaried, in the 30% bracket, and saving for a goal five years out. There the monthly payout is a leak, not a benefit.

One practical note. You need a Post Office Savings Account to receive the payout. Open both together, or the interest sits waiting.