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What POMIS does and doesn’t do
Post Office Monthly Income Scheme is exactly what the name says. You put money in. Every month, interest lands in your bank account. After 5 years, you get your principal back.
Simple. Government-backed. No market exposure.
What it doesn’t do: compound. Since the interest is paid out every month rather than added to the principal, there’s no compounding effect. Your monthly income stays flat throughout the 5-year tenure. That’s fine if you need the cash flow. Not ideal if you’re trying to grow wealth.
The monthly income numbers
On a joint account with ₹15 lakh at 7.4%, monthly income works out to ₹9,250. For a retired couple who’ve maxed both individual and joint accounts (₹9L + ₹15L = ₹24L), the combined monthly income is approximately ₹14,800 per month from POMIS alone.
POMIS vs savings account vs FD
Most banks offering monthly-payout FDs for 5 years give 6.5-7%. POMIS at 7.4% beats this. There’s also no credit risk since the post office is backed by the government, unlike a bank FD which carries (low but non-zero) credit risk.
FDs give more flexibility: you can break them with a penalty, reinvest automatically, and do it all online without visiting a branch.
Who uses POMIS in practice
POMIS is most popular with retirees and people with a lump sum (gratuity, EPF payout, inheritance) who need regular income.
A colleague’s father retired from a PSU bank with a combined gratuity and EPF corpus of about ₹45 lakh. He put ₹9 lakh into POMIS for monthly income (₹5,550/month), ₹30 lakh into SCSS for quarterly income, and the rest into a short-term debt fund. The POMIS portion gives him a predictable ₹5,550 landing on a fixed date every month. He doesn’t need to think about it.
The premature closure math
Before year 3: you lose 2% of principal. On ₹9 lakh, that’s ₹18,000 lost. Between year 3-5: you lose 1% of principal, or ₹9,000 on ₹9 lakh. Add this to your decision if you might need the money before year 5.
POMIS cannot be closed in the first year under any circumstances. Keep an emergency fund separate before committing to POMIS.