How this instrument works
The Post Office Monthly Income Scheme is a government-backed savings account run through India Post: deposit a lump sum once, and the account pays a fixed rupee amount into your hands every month for five years, then returns the original deposit whole at maturity. It is built for someone who already has the capital and wants a predictable income stream from it rather than growth — a retiree living off interest, a person parking a settlement or provident-fund payout, a household wanting one bill-paying number that never moves for five straight years.
The formula is deliberately the plainest one on this site: take the annual rate the government has fixed for the quarter, apply it to the deposit for one year, then divide that year's interest into twelve equal monthly instalments. Nothing about POMIS lets that interest fold back into the principal and start earning on itself — the scheme exists specifically to hand interest out, not to reinvest it, which is the opposite design choice a compounding fixed deposit makes with an identical rate.
What the arithmetic leaves out matters to anyone sizing an income off it. Deposit amount, ₹ is capped at ₹9,00,000 in a single-holder account or ₹15,00,000 held jointly, so the payout cannot simply be scaled up past that ceiling. The formula also assumes the account runs its full five-year term untouched — closing it early costs a penalty on the principal that this calculator does not model — and it says nothing about the income tax due on every rupee received, which India Post does not withhold at source but which the account holder must still declare.
- Enter the lump sum you are placing into Deposit amount, ₹ — POMIS accepts a single deposit, not recurring contributions, up to ₹9,00,000 for one holder.
- Set POMIS annual interest rate, % to the rate the government has published for the quarter you open the account in.
- Read Monthly income payout, ₹ for the fixed rupee amount credited to your account every month for the five-year term.
- Raise Deposit amount, ₹ toward the ₹9,00,000 ceiling to see how far the monthly income can realistically stretch in one account.
Worked example — the ₹9,00,000 ceiling at 7.4%
Set Deposit amount, ₹ to 900,000 — the maximum a single POMIS account can hold — and POMIS annual interest rate, % to 7.4, a rate the government has actually set for this scheme. The formula runs 900,000 × 7.4 ÷ 1200 = 5,550, so Monthly income payout, ₹ reads exactly ₹5,550, credited to the account holder every month without variation for the entire five-year term.
Across those five years that fixed ₹5,550 a month totals ₹3,33,000 paid out, and not one rupee of it ever rejoins the ₹900,000 principal to earn interest on interest. A fixed deposit at the same 7.4% would instead compound that interest back into the balance and hand over a single larger sum at maturity — the two instruments trade an identical rate for two entirely different shapes of payout.
Questions
Why does the monthly payout stay flat for the whole five years?
Because POMIS pays interest out instead of folding it back into the balance. Monthly income payout, ₹ is computed once from Deposit amount, ₹ and the quarter's fixed rate, and that identical rupee figure repeats every month for the full term since the principal it is calculated from never changes. A scheme that reinvested the interest, like a compounding fixed deposit, would instead pay a rising amount as its underlying balance grew.
What is the largest deposit POMIS will actually accept?
₹9,00,000 in an account held by one person, or ₹15,00,000 if the account is opened jointly — India Post enforces both ceilings and simply will not accept a deposit above them. The worked example above sits right at the single-holder limit, which is why ₹5,550 a month is close to the largest payout achievable from one individual account at that rate.
Can the interest rate change partway through my five years?
No. Whatever POMIS annual interest rate, % is published the day you open the account stays locked for that account's entire five-year term, even though the government resets the published rate every quarter for new deposits going forward. An account opened when the rate was lower keeps that lower rate to maturity regardless of where the published rate moves afterward.
Is the monthly payout taxed before it reaches me?
No — India Post pays Monthly income payout, ₹ in full and does not withhold tax at source on POMIS interest. That does not make it tax-free: the entire amount counts as taxable income under Indian tax law and must be declared when filing. This instrument returns the gross payout only; what is kept after tax depends on the account holder's own tax bracket, which sits outside this arithmetic.
What if I need the deposit back before five years are up?
India Post charges a penalty on the principal rather than adjusting the monthly figure: withdrawing between one and three years into the term forfeits 2% of the deposit, withdrawing between three and five years forfeits 1%, and no withdrawal at all is permitted inside the first year. This calculator prices the account only if it runs to full maturity; it does not model either penalty.
How is this different from a fixed deposit paying the same rate?
A fixed deposit at an identical rate typically compounds interest back into its balance and releases one lump sum at maturity, so its total payout grows faster than POMIS's flat monthly figure over an equal term. POMIS instead distributes interest as simple, non-compounding income every single month — the exchange is a smaller total return for cash that actually arrives on a monthly schedule rather than staying locked up until the account closes.
References
- CFPB — consumer tools for bank accounts
- IRS Topic no. 403 — interest income and Form 1099-INT
- SEC Investor.gov — Annuities
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.