Conceptual · Article 6.6

Post Office Monthly Income Scheme.

Q: Is POMIS better than a bank FD for monthly income?

For monthly income, POMIS offers three practical edges over a bank FD: no TDS, which simplifies compliance for investors near or below the tax threshold; full sovereign backing with no deposit-insurance ceiling; and a rate locked for the entire 5 years regardless of later market moves. Bank FDs may pay a comparable or higher headline rate and offer more flexibility, but they deduct TDS on interest above ₹50,000 a year and carry bank credit risk beyond the ₹5 lakh DICGC cover. Both are taxed at your slab rate, so neither has a structural tax advantage.

A Fixed Monthly Cheque from the Government, for Five Years.

Published as on 22 July 2026

POMIS is the simplest income instrument India Post offers: you place a lump sum, and the government sends you a fixed interest payment every month for five years — then returns your principal in full at the end. The rate is locked on the day you deposit and does not move for the entire term, however the quarterly reset changes it for new accounts. At 7.4% per annum (Q4 FY 2025-26), a single investor's ₹9 lakh maximum pays about ₹5,550 a month; a ₹15 lakh joint account pays about ₹9,250. There is no market risk, no Section 80C deduction, and no TDS — but the monthly interest is fully taxable at your slab rate. This is a cash-flow tool for conservative households, not a tax-saver.

7.4% p.a.

Rate · Paid Monthly

₹5,550/mo

On ₹9 Lakh

5 Years

Fixed Term

Slab · No 80C

Tax · No TDS

Executive Summary · Page 2

Executive Summary · 6 Findings

POMIS answers one narrow question well: how does a household turn a lump sum into a predictable monthly cheque, backed by the government, for five years? What it is not is a tax-saver. The deposit earns no Section 80C deduction, and every rupee of monthly interest is taxable at your slab rate. The right way to judge it is therefore not the 7.4% headline but the post-tax monthly yield in your hands — and against whom you are comparing it: an SCSS, an annuity, or a laddered FD.

Covers what POMIS is and how the monthly payout works, who can and cannot invest, the ₹9 lakh single and ₹15 lakh joint limits and per-person cap, the current 7.4% rate and the deposit-date rate lock, the no-80C and fully-taxable-no-TDS reality across brackets, premature-withdrawal penalties and maturity options, the POMIS-plus-RD strategy, how it stacks up against SCSS and bank FDs, where it belongs in a portfolio, and six questions Indian investors ask.

Key Findings

A lump sum in, a fixed monthly cheque out — for five years.

You deposit once at a post office; the government pays a fixed monthly interest for 5 years and returns your principal in full at maturity. At 7.4% p.a., ₹9 lakh (the single-account maximum) pays about ₹5,550 a month; ₹15 lakh (the joint maximum) pays about ₹9,250. The payout is credited to your linked post office savings account or swept to your bank via NACH/ECS — no branch visit needed.

The income layer — not a tax-saver.

POMIS sits in the income sleeve of a portfolio: sovereign-safe cash flow for households that need it. It carries no Section 80C benefit and no market exposure. Judge it not by the 7.4% headline but by the post-tax monthly yield you actually receive — and always against the right alternative, an SCSS, annuity or FD, never against equity.

7.4% is locked on your deposit date for the full term.

The Ministry of Finance resets small-savings rates every quarter, but a revision only applies to accounts opened after it. Your rate is fixed on the day you deposit and holds for all five years — deposit during a high-rate window and you carry that advantage even if rates are later cut. Renewal at maturity, however, takes the prevailing rate, not your original one.

No 80C, fully taxable at slab — and no TDS.

The deposit earns no Section 80C deduction under either regime, and the monthly interest is fully taxable under Income from Other Sources at your slab rate. Unlike a bank FD, India Post deducts no TDS — but that does not make it tax-free. You must self-declare the year's interest in your ITR. Forms 15G/15H are irrelevant here: there is no TDS to prevent.

Five-year lock, with graded exit penalties.

No withdrawal is allowed in the first year. Exit between years 1 and 3 and 2% is deducted from principal; between years 3 and 5, 1%. The penalty hits the returned deposit only — the monthly interest already paid stays yours. At maturity you can withdraw, renew at the then-current rate, or leave the principal earning the low POSA rate for up to two years.

A cash-flow tool — compare it to SCSS and FDs.

POMIS shines when the recipient has little other income — a retired parent or non-earning spouse receives close to the full 7.4%. For a 30% bracket investor the post-tax yield falls to roughly 5.2%, narrowing the case. Eligible seniors usually prefer SCSS (8.2%, 80C, ₹30 lakh cap); against bank FDs, POMIS wins on no-TDS simplicity and uncapped sovereign safety.

At A Glance

Metric	Value	Detail
Operator	India Post	Ministry of Finance
Term	5 years	Monthly payout
Rate (Q4 FY25-26)	7.4% p.a.	Locked at deposit
Min / Multiple	₹1,000	In ₹1,000 steps
Max Single	₹9,00,000	Per-person cap
Max Joint	₹15,00,000	Up to 3 adults
Tax	Slab, no 80C	No TDS, self-declare
Best Use	Monthly income	Not a tax-saver

Exhibit 01: Post-Tax Yield of 7.4% POMIS by Bracket

Tax Bracket	Pre-Tax	Approx Post-Tax
0% (below limit)	7.4%	7.4%
5%	7.4%	~7.0%
20%	7.4%	~5.9%
30%	7.4%	~5.2%

Figures exclude surcharge and cess; actual post-tax return varies. The scheme is sharpest where the recipient is below the exemption limit — a retired parent or non-earning spouse keeps close to the full 7.4%. For a 30% bracket investor, ~5.2% barely clears inflation.

The Opening · Page 3

The Opening

POMIS is one of the very few government instruments built to pay you every month rather than at maturity. The bargain is plain: hand India Post a lump sum, and for the next five years a fixed interest amount lands in your account each month, with the whole principal returned intact at the end. There is no market to watch, no NAV to track, no reinvestment decision to make month to month — just a predictable cheque. For a retiree meeting household bills, that regularity is the entire point.

"POMIS is not where you go to save tax — it earns no 80C deduction and every rupee of interest is taxed at your slab. It is where a household goes to convert savings into a dependable monthly cheque. Judge it by the money that actually reaches your hand, not the headline rate."
Income, Not Deduction

The mechanics. The rate is set on the day you deposit and holds for the full five years, insulated from the government's quarterly resets — those apply only to accounts opened afterwards. Deposit in a high-rate window and you carry that advantage to the finish; the flip side is that renewing at maturity re-prices you at whatever the rate is then. The interest is simple and fixed, not compounding: on ₹9 lakh at 7.4%, that is ₹66,600 a year, paid as ₹5,550 a month.

The tax reality. POMIS is often mis-sold as a small-savings tax play. It is not. The deposit qualifies for no deduction, and the monthly interest is fully taxable under Income from Other Sources at your slab rate. India Post deducts no TDS — a genuine convenience for investors near the exemption limit — but the flip side is that self-declaring the annual interest in your ITR is entirely your responsibility.

The Honest Boundary: POMIS is NOT a tax-saving instrument — there is no 80C benefit and the interest is fully taxable. It is NOT a wealth-compounding engine — the interest is simple and, left in the savings account, idle. It is NOT for money you may need within twelve months — the first year is fully locked. It IS a sovereign-safe way to turn a lump sum into a fixed monthly income for five years, most powerful when the recipient sits below the tax threshold.

Structure

Part I

What POMIS Is, Who Can Invest & Where It Fits

Part II

The Tax Reality, the Lock-In & Exit Penalties

Part III

POMIS + RD, and POMIS vs SCSS vs Bank FD

Part IV

The Verdict: An Income Sleeve, Used Correctly

Use If

✓ You need dependable monthly income

✓ Recipient is below/near the tax limit

✓ Capital safety over high returns

✓ A fixed 5-year expense stream to fund

Do NOT Use If

✕ You are chasing a tax deduction

✕ You are in the 30% bracket with no need

✕ You are in the wealth-building phase

✕ You may need capital within 12 months

Part I

What POMIS Is, Who Can Invest, and Where It Fits in a Portfolio

The lump-sum-in, monthly-cheque-out mechanics and the deposit-date rate lock; who is eligible — residents, joint holders and guardians, but not NRIs; the ₹9 lakh single and ₹15 lakh joint limits; and where POMIS belongs — in the income sleeve of a conservative household, matched to a five-year need.

Part I · Page 4

Monthly Income by Deposit

Investment	Monthly Income
₹1,00,000	₹617
₹3,00,000	₹1,850
₹5,00,000	₹3,083
₹9,00,000 (single max)	₹5,550
₹15,00,000 (joint max)	₹9,250

All figures at 7.4% p.a. (Q4 FY 2025-26). Interest is simple, not compounding, and credited monthly to your linked Post Office Savings Account or swept to a bank account via NACH/ECS. The rate is fixed on your deposit date for the full five years.

Investment Limits

₹9 Lakh Single · ₹15 Lakh Joint

Minimum ₹1,000, in multiples of ₹1,000. A per-person cap of ₹9 lakh applies across all your accounts — individual plus your equal share in any joint account. A three-person ₹15 lakh joint account counts as ₹5 lakh against each holder's ₹9 lakh ceiling. Limits were raised in Budget FY 2023-24 from the old ₹4.5 lakh single / ₹9 lakh joint — older sources still cite the earlier figures.

Who Can Invest

Category	Eligible?
Resident individual	Yes
Joint (2–3 adults)	Yes, equal shares
Guardian for minor <10	Yes, separate cap
Minor aged 10+	Yes, own name
NRI	Not eligible

Joint holders must hold equal shares. A guardian's account for a child under 10 is tracked separately and does not count against the guardian's personal ₹9 lakh limit. NRIs cannot invest, and existing holders who turn non-resident cannot renew.

Where it fits: POMIS belongs in the income sleeve of a conservative or retired household — sovereign-safe monthly cash flow for a five-year need. A common design routes a lump sum into a non-earning spouse's or parent's name, so the interest lands in a low or nil tax bracket. Ill-suited: a young saver's wealth-building corpus, where five years at 7.4% pre-tax forgoes the long-run compounding of equity.

Part II

The Tax Reality the Headline Hides, and the Five-Year Lock-In

Why POMIS earns no Section 80C deduction and every rupee of monthly interest is taxable at your slab rate — with no TDS and a self-declaration duty; and how the graded premature-withdrawal penalties and maturity options shape a five-year commitment.

Part II · Page 6

Taxation (FY 2025-26)

No Section 80C — Not a Tax-Saver

The amount you deposit in POMIS qualifies for no deduction under Section 80C, under either the old or new regime. Investors who treat it as a tax-saving small-savings scheme are mistaken — its value is the monthly cash flow, not any deduction.

Interest Fully Taxable at Slab

The monthly interest is taxable under Income from Other Sources at your applicable slab rate, under both regimes. It is taxed on receipt — each month's payout is income in the year it is credited, reported as the year's total (typically twelve payments) in that year's ITR.

No TDS → Self-Declaration Duty

Unlike a bank FD, India Post deducts no TDS on POMIS interest — you receive the full amount. This is not tax-free; you must self-declare the annual interest in your ITR and pay the tax due. Forms 15G/15H do not apply — there is no TDS to prevent — but keep a record of interest received for accurate filing.

Premature Withdrawal Penalties

When You Exit	Penalty on Principal
Within 1 year	Not permitted
Year 1 to 3	2% deducted
Year 3 to 5	1% deducted
At maturity (5 yr)	No penalty

The Penalty Hits Principal Only

The deduction applies to the returned deposit, not the interest already paid. Close a ₹5 lakh account at two years and you get ₹4,90,000 back (₹5 lakh minus 2%) — the roughly ₹74,000 of monthly interest received over 24 months is already in your hands.

At Maturity — Three Choices

Withdraw · Renew · Leave

Withdraw the full principal and close; renew for another five years at the rate prevailing on the renewal date (not your original rate); or take no action, and the principal earns the low POSA rate (indicative 4% p.a.) for up to two years before it must be claimed. Diarise the maturity date if you intend to reinvest.

Part III

The POMIS + RD Strategy, and How POMIS Stacks Up Against SCSS and FDs

Turning idle monthly interest into a growing corpus by routing it into a Post Office Recurring Deposit; and the honest comparison for an income investor — POMIS against SCSS for eligible seniors, and against a bank monthly-payout FD.

Part III · Page 8

POMIS + Recurring Deposit

Convert Income into a Corpus

Left in the savings account, the monthly interest earns the low POSA rate and does not compound. Instead, set a standing instruction to route the ₹5,550 monthly payout into a Post Office Recurring Deposit (around 6.7% p.a., compounded quarterly, Q4 FY 2025-26). The POMIS supplies the cash flow; the RD turns that flow into a growing corpus — ideal for investors who do not need the income to spend.

Direct POMIS vs Liquid Idle Cash

Route for Interest	Rate	Effect
Idle in POSA	~4%	No compounding
Swept to PO RD	~6.7%	Compounds
Spent on expenses	—	Meets cash needs

POMIS vs SCSS vs Bank FD

Feature	POMIS	SCSS	Bank FD
Rate	7.4%	8.2%	~5.5–7.5%
Payout	Monthly	Quarterly	Monthly
Max	₹15L joint	₹30L	No limit
80C	No	Yes	No
TDS	None	>₹50K	>₹50K
Eligible	All residents	60+ only	All

Indicative Q4 FY 2025-26. SCSS is for senior citizens only. Bank FDs are DICGC-insured to ₹5 lakh; POMIS carries full sovereign backing.

The honest comparison: for an eligible senior, SCSS usually wins — a higher 8.2% rate, an 80C deduction on up to ₹1.5 lakh, and a ₹30 lakh ceiling — so it is filled first, with POMIS layered on for the monthly rhythm. Against a bank FD, POMIS trades a possibly higher headline rate for two real edges: no TDS (simpler for those near the tax threshold) and uncapped sovereign safety beyond the ₹5 lakh DICGC cover. The comparison that never applies is POMIS versus equity — different jobs entirely.

Part IV

The Verdict

A monthly cheque you can count on. Not a deduction you can claim.

Part IV: The Verdict · Page 10

30-Second Summary

POMIS is a five-year government scheme that converts a lump sum into a fixed monthly cheque, with the principal returned in full at maturity. At 7.4% p.a. (Q4 FY 2025-26), ₹9 lakh pays about ₹5,550 a month and ₹15 lakh joint about ₹9,250. The rate is locked on your deposit date for the full term. It is the income sleeve of a conservative household — sovereign-safe, predictable, no market risk — not a wealth engine and not a tax-saver.

There is no Section 80C benefit, and the monthly interest is fully taxable at your slab rate under Income from Other Sources. India Post deducts no TDS, so self-declaring the interest in your ITR is your duty. Judge POMIS by the post-tax monthly yield in your hands — close to 7.4% for a recipient below the tax limit, roughly 5.2% at 30% — and compare it to SCSS, an annuity or an FD ladder, never to equity. First-year withdrawal is barred; exits after that carry a 1–2% principal penalty.

"The government guarantees the cheque arrives and the principal comes back. It says nothing about beating inflation or saving tax. POMIS is the cleanest way to give a household a dependable monthly income for five years — and one of the weakest ways to grow money you have time to invest. Match the tool to the job."
The Final Orientation

The Bottom Line: Use POMIS to turn a lump sum into a five-year monthly income — sovereign-safe, penalty-free at maturity, most powerful when the recipient sits below the tax threshold. Place it in a low- or nil-bracket family member's name where you can. If you do not need the cash to spend, sweep the interest into a Post Office RD so it compounds rather than idling. For eligible seniors, fill SCSS first. And remember it earns no 80C and pays no compounding — set your expectations to the post-tax yield, and verify the current quarter's rate before you deposit.

ADWIZR · July 2026

Decision Rules

Use Correctly As

✓ A five-year monthly income stream

✓ Income in a low-bracket relative's name

✓ Sovereign safety beyond ₹5L/bank

✓ A POMIS + RD compounding hybrid

Misuse Destroys Value

✕ Chasing a tax deduction

✕ 30% bracket with no income need

✕ A young saver's growth corpus

✕ Money you may need within a year

Three Misconceptions

What Investors Get Wrong

(1) "POMIS saves tax." No — there is no 80C and the interest is fully taxable. (2) "No TDS means tax-free." No TDS only means nothing is withheld; you still self-declare and pay. (3) "7.4% is what I keep." At 30% tax it is ~5.2%; left idle in the savings account it earns just ~4%.

vs SCSS for Seniors

Fill SCSS First, Layer POMIS

SCSS: 8.2% quarterly, 80C benefit, ₹30 lakh cap — but seniors only. POMIS: 7.4% monthly, no 80C, ₹9 lakh personal cap, open to all residents. An eligible senior fills SCSS first, then adds POMIS for the monthly cadence. A non-senior who needs monthly income uses POMIS directly.

5 yr

Term

Monthly payout

7.4%

Rate p.a.

Locked at deposit

Slab

Tax, no 80C

No TDS, self-declare

Investor FAQ

Questions Indian Investors Ask

Six questions, answered directly.

Investor FAQ · Page 12

Frequently Asked Questions

Q1 Can I open multiple POMIS accounts?

Yes. You can hold several POMIS accounts across different post offices, provided your aggregate personal share — individual accounts plus your proportional share in any joint accounts — does not exceed the ₹9 lakh per-person ceiling. This helps investors who live across cities or run separate income streams for different family members, but the ₹9 lakh cap applies to the person, not to any single account.

Q2 Is POMIS better than a bank FD for monthly income?

For monthly income, POMIS offers three practical edges: no TDS, which simplifies compliance for investors near or below the tax threshold; full sovereign backing with no deposit-insurance ceiling; and a rate locked for the whole 5 years regardless of later market moves. Bank FDs may pay a comparable or higher headline rate and offer more flexibility, but they deduct TDS on interest above ₹50,000 a year and carry bank credit risk beyond the ₹5 lakh DICGC cover. Both are taxed at your slab rate, so neither has a structural tax advantage.

Q3 Can a retired senior citizen combine POMIS and SCSS?

Yes, and it is a common income-planning move. A senior citizen can invest up to ₹30 lakh in SCSS (8.2% paid quarterly, with a Section 80C deduction on up to ₹1.5 lakh) and up to ₹9 lakh in POMIS (7.4% paid monthly, no 80C). The pairing layers a monthly cheque over a quarterly one, both government-guaranteed. For an eligible senior, SCSS is usually filled first for its higher rate and 80C benefit; POMIS then adds the monthly cash-flow rhythm.

Q4 If I don't need the monthly interest, does it compound automatically?

No. Uncollected POMIS interest does not compound inside the POMIS account. It sits in your linked Post Office Savings Account earning the low POSA rate (indicative 4% p.a., subject to change). To make it work harder, many investors route the monthly payout into a Post Office Recurring Deposit (around 6.7% p.a., compounded quarterly, Q4 FY 2025-26) via a standing instruction — converting a pure income scheme into a hybrid that also builds a corpus.

Q5 Is POMIS interest taxed when received monthly or at year-end?

POMIS interest is taxed on receipt. Each monthly payment is income in the financial year it is credited, so you report the total interest received during the year — typically twelve payments — under Income from Other Sources in that year's ITR. There is no deferral to maturity and no TDS, which makes accurate self-declaration the investor's responsibility. Keeping a simple annual record of interest received is essential for correct filing.

Q6 What happens to my POMIS account if I pass away before maturity?

POMIS carries a nomination facility. If you have registered a nominee, they can claim the balance principal and any accrued interest on production of the required documents. Without a nomination, legal heirs must claim through the prescribed legal process with supporting paperwork. Registering a nominee at the time of opening — and keeping it updated — spares the family avoidable delay.

Key Terms & Definitions

POMIS

The Post Office Monthly Income Scheme — a government savings plan run by India Post in which you deposit a lump sum and receive a fixed monthly interest for five years, with the full principal returned at maturity. It is an income instrument, not a tax-saver: no Section 80C, interest fully taxable.

Deposit-Date Rate Lock

The interest rate is fixed on the day you deposit and holds for the entire five-year term. The government's quarterly small-savings resets apply only to accounts opened after each revision, so an existing POMIS account is unaffected by later cuts or hikes.

Per-Person Cap

The ₹9 lakh limit that applies to an individual across all POMIS holdings — individual accounts plus an equal share in any joint account. A ₹15 lakh three-person joint account counts as ₹5 lakh against each holder's ₹9 lakh ceiling.

No TDS, Self-Declaration

India Post deducts no tax at source on POMIS interest. This is not tax exemption: the investor must declare the annual interest under Income from Other Sources in the ITR and pay tax at the applicable slab rate. Forms 15G/15H are irrelevant as there is no TDS to prevent.

Premature-Withdrawal Penalty

A charge on the returned principal for exiting early: no exit in year one; 2% deducted between years one and three; 1% between years three and five; nothing at maturity. Interest already received is never clawed back.

POMIS + RD Strategy

Routing the monthly POMIS interest into a Post Office Recurring Deposit (around 6.7% p.a., compounded quarterly) instead of leaving it idle in the savings account — converting a pure income scheme into a hybrid that also grows a corpus.