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The biggest need of every person after retirement is a fixed and regular monthly income, so that the daily expenses of the household can be carried out without any worries. Many people, instead of keeping their lifetime hard-earned money or provident fund money lying idle in banks, want to invest it in a place where there is zero risk and assured returns.
If you too are looking for a safe investment away from the ups and downs of the market, then consider the Indian Post Office. ‘Post Office Monthly Income Scheme’ (POMIS) Can prove to be a panacea option for you. This small savings scheme has been the first choice for senior citizens and investors looking for safe returns for years. Let us know the intricacies of this scheme and some very important rules related to investment.
What is Post Office Monthly Income Scheme (POMIS)?
It is a small savings scheme fully backed and secured by the Government of India. It is specially designed for those who want to deposit a lump sum and get fixed interest on it every month.
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Stability and Fixed Returns: The biggest strength of this scheme is that at the time of opening the account, you know the exact amount you will get every month for the next 5 years, which makes it very easy for you to plan your monthly budget.
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Duration: Maturity period of this scheme 5 years which makes it the most reliable for medium-term financial goals.
Why is this scheme considered the best scheme for retirement?
At this stage of age, no person wants to take any kind of financial risk like stock market movements, mutual fund ups and downs.
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Complete protection from risk: Due to government guarantee, your principal amount remains completely safe.
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Continuous Cash Flow: Instead of increasing your capital, this scheme Cash Flow Focuses on maintaining. Every month, on a fixed date, the interest money is transferred directly to your savings account, thus eliminating your financial dependence on others.
Keep these 4 things in mind before investing money in POMIS
Even though this scheme is very safe, it is very important to understand these practical things before locking your big fund in it:
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It is not a wealth creator (not right for everyone): If you are between 25 to 40 years of age and want to create a big wealth for the future, then this scheme is not for you at all. This scheme is only for those senior citizens or investors whose retirement corpus is already ready and they just want its security and regular income.
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Lock-in period of 5 years (lack of liquidity): In this scheme your money is locked for 5 years. However, in case of emergency, you can withdraw money before maturity (Premature Withdrawal), but for doing so, a strict penalty is charged by the post office, which can reduce your principal amount. Therefore, invest only that money which is not needed immediately.
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Strict tax rules (No Tax Rebate): Many people mistake it for a tax-free scheme like PPF. Keep in mind that there is no exemption under Section 80C of Income Tax on investing in Post Office Monthly Income Scheme. Moreover, the monthly interest received from this scheme is added to your total annual income and your Fully taxable as per ‘Income Tax Slab’ It happens.
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Balancing the portfolio is important: A wise investor never puts all his eggs in one basket. You should not invest your entire savings in POMIS alone. Make this a part of your overall asset allocation to ensure stability in your portfolio, and invest the remaining money in hybrid mutual funds or other safe options that can provide inflation-beating long-term returns.