Tax rules on Post Office Monthly Income Scheme (POMIS) for FY 2026-27: no 80C, fully taxable interest, Section 80TTB for seniors, and reporting in ITR.
The Post Office Monthly Income Scheme (POMIS), often called the National Savings Monthly Income Scheme, has long been a favourite for retirees, conservative savers, and households seeking predictable monthly cash flow. For FY 2026-27, POMIS continues to be offered by India Post with interest rates notified quarterly by the Ministry of Finance. However, the tax treatment is often misunderstood — POMIS does not qualify for Section 80C deduction on investment, and the monthly interest is fully taxable. Knowing the rules helps you plan realistically.
Key features of POMIS
- Tenure: 5 years from the date of opening the account.
- Investment limits: minimum ₹1,000; maximum ₹9 lakh in single account and ₹15 lakh in joint account (subject to the limits prevailing under the small savings scheme review).
- Interest: paid monthly at the rate notified quarterly by the Ministry of Finance.
- Joint holding: allowed for up to three adults.
- Eligible holders: resident individuals, including on behalf of minors through guardians.
- No Tax Deducted at Source (TDS) on the monthly interest credited.
Tax treatment — what POMIS does and does not offer
Unlike Public Provident Fund (PPF), National Savings Certificate (NSC), or Senior Citizen Savings Scheme (SCSS), the amount deposited in POMIS does not qualify for deduction under Section 80C. The monthly interest paid by India Post is fully taxable as Income from Other Sources at the depositor's slab rate. There is no TDS, which means the depositor must self-assess and pay advance tax if liability exceeds ₹10,000 in the financial year.
Section 80TTA and 80TTB interplay
Many taxpayers mistakenly try to claim POMIS interest under Section 80TTA or 80TTB. Section 80TTA applies only to interest on savings bank accounts (up to ₹10,000 deduction); POMIS interest is not savings account interest. Section 80TTB applies to senior citizens for interest on deposits with banks, post offices, and co-operative banks (up to ₹50,000 deduction) — POMIS interest does qualify for 80TTB for senior citizens under the old tax regime.
Reporting POMIS interest in your ITR
- Aggregate the monthly interest credited during the year using your passbook or India Post statement.
- Report the total under Income from Other Sources in your ITR.
- Senior citizens under the old regime can claim deduction under Section 80TTB up to ₹50,000 on aggregate eligible interest including POMIS.
- Pay advance tax in four instalments if your total tax liability is expected to exceed ₹10,000.
- Retain the POMIS account passbook and annual interest statement for assessment records.
Premature closure rules
POMIS can be closed prematurely after one year of opening, with a penalty. Closure between one and three years carries a 2 per cent deduction on principal; closure between three and five years carries a 1 per cent deduction. The penalty is recovered from the principal at the time of closure, and the remaining principal plus accrued interest up to closure date is paid out.
POMIS versus other monthly income alternatives
Senior citizens often compare POMIS with SCSS, fixed deposits with banks, and the RBI Floating Rate Savings Bond. SCSS offers higher interest with Section 80C benefit but a different cash flow pattern. Bank FDs offer flexibility but attract TDS. The RBI Floating Rate Bond is variable. POMIS scores on sovereign comfort and stable monthly cash flow but does not offer 80C.
Conclusion
POMIS is a cash-flow product, not a tax-saving product. Use it for predictable monthly income from retirement corpus or surplus capital. Senior citizens get partial relief via Section 80TTB under the old regime. Everyone should track POMIS interest, factor it into advance tax, and decide between old and new regimes based on the larger deduction picture.
