Post Office Monthly Income Scheme Calculator

What Is the Post Office Monthly Income Scheme?

The Post Office Monthly Income Scheme (POMIS) is a government-backed savings instrument that provides a regular monthly income stream. Investors deposit a lump sum, and the scheme pays interest at a fixed rate each month. At maturity, the principal amount is returned in full. It is a popular choice for retirees and conservative investors seeking predictable cash flow with capital preservation.

How the Monthly Interest Is Calculated

The monthly payout is determined by the annual interest rate set by the government, which is revised quarterly. The formula is straightforward:

Monthly Interest = (Principal × Annual Interest Rate) ÷ 12

For example, if the annual rate is 7.4% and the investment is ₹4,50,000, the monthly interest is (4,50,000 × 0.074) ÷ 12 = ₹2,775. The interest is credited directly to the investor's savings account each month.

The maturity value is always equal to the principal amount. No bonus or additional interest is paid at maturity under the current scheme rules.

Key Assumptions in the Calculation

• The annual interest rate is fixed at the time of investment and remains constant for the entire 5-year tenure.
• Interest is calculated on the principal amount only; there is no compounding.
• The monthly payout is rounded to the nearest rupee.
• Premature closure penalties are not reflected in the standard calculation.

How to Use This Calculator

1. Enter the lump sum amount you plan to invest (minimum ₹1,000, maximum ₹9,00,000 for single accounts).
2. Select the current applicable annual interest rate.
3. The calculator instantly shows your estimated monthly interest payout and the total maturity amount.

Use the results to compare different investment amounts or to plan your monthly budget around a fixed income stream.

Understanding Your Results

The calculator provides two key figures:

• Monthly Interest: The fixed amount you will receive each month for 5 years. This is your regular income from the investment.
• Maturity Amount: The total sum returned after 5 years. This equals your original principal, as the interest is paid out monthly and not reinvested.

Note that the actual interest rate may change if you invest in a different quarter. Always verify the current rate on the official India Post website before making a decision.

Common Mistakes to Avoid

• Confusing monthly payout with annual return: The monthly interest is a fraction of the annual rate, not an additional return.
• Assuming compounding: POMIS does not compound interest. The monthly payout is spent or withdrawn, not added to the principal.
• Ignoring the investment limit: Single accounts have a maximum limit of ₹9,00,000. Joint accounts have a higher limit of ₹15,00,000.
• Forgetting premature closure penalties: Closing the account before 5 years incurs a penalty, which reduces the effective return.

Practical Use Cases

• Retirement income planning: Supplement a pension with a predictable monthly payout from a lump sum corpus.
• Fixed income allocation: Diversify a conservative portfolio with a government-guaranteed instrument.
• Short-term goal funding: Generate monthly cash flow for recurring expenses like utility bills or medical costs.
• Gift for dependents: Invest on behalf of a minor or a non-working family member to create a steady income stream.

Limitations and Constraints

• The interest rate is fixed for the entire 5-year tenure, so you cannot benefit from future rate increases.
• There is no tax deduction at source, but the interest income is taxable under "Income from Other Sources."
• The scheme does not offer inflation protection; the real value of the monthly payout decreases over time if inflation is high.
• Premature closure is allowed only after 1 year, with a penalty of 2% of the deposit amount.
• The maximum investment limit restricts the total monthly income you can generate from this scheme alone.