1. Start with the principal available to deposit: ₹1,00,000.
2. Note the annual rate: 7%.
3. Convert to a monthly rate by dividing by 12: 7% ÷ 12 ≈ 0.583% per month.
4. Apply that monthly rate to the principal: ₹1,00,000 × 0.00583 ≈ ₹583 per month.
5. Multiply by the number of months for cumulative interest: ₹583 × 60 ≈ ₹35,000.
6. Estimate TDS at an illustrative 10%: ₹35,000 × 10% ≈ ₹3,500, leaving a net of about ₹31,500 after this illustrative deduction.
7. Since principal is typically returned in full at maturity in these schemes, the full picture is ₹1,00,000 principal plus ₹35,000 gross interest paid out monthly along the way.

Say the goal is a monthly income of about ₹900 (roughly 1.5× this scenario's ₹583) at the same 7% annual rate. Rearranging the formula to solve for principal — Principal = Target monthly income × 12 × 100 ÷ Rate — the corpus needed is approximately ₹1,54,286. That is the direction most people actually plan in: start from a monthly expense you need to cover, then work backward to the deposit size.

Different horizons (same P and R)

Different rates (same P and months)

Different principals (same R and months)

India's Post Office Monthly Income Scheme is a specific, real product that this calculator's generic "monthly interest" model resembles in spirit. A few real POMIS rules worth knowing — always verify the current figures on the India Post website or at a post office before investing, since rates and limits are revised periodically:

• Investment limit: historically capped at ₹9,00,000 for a single account and ₹15,00,000 for a joint account. These caps have changed over time and may change again, so confirm the current figure before investing. Your entered principal of ₹1,00,000 is within the historical single-account limit.
• Tenure: a fixed 5-year term, with premature withdrawal allowed after 1 year subject to a deduction from the principal — the penalty percentage varies by how early you exit.
• Payout: interest is credited monthly to a linked savings account rather than compounding within the scheme, matching the flat monthly-payout model illustrated above. Some investors sweep that savings-account interest into a recurring deposit for a secondary compounding layer — a personal choice, not a feature of the scheme itself.
• Principal: returned in full at maturity (5 years), assuming no premature withdrawal.

POMIS, the Senior Citizen Savings Scheme, and other small savings instruments do not carry a fixed rate for life — the government reviews and revises them every quarter, broadly linking them to yields on comparable government bonds. The rate quoted today can differ from the rate available when you actually open the account, and differ again from whatever figure you last saw in an article or advertisement. Check the officially published current rate before finalising a decision.

It is also why this calculator asks for your own rate assumption instead of hardcoding one: the arithmetic — principal times rate divided by twelve, scaled by months — never changes, but the rate itself is a moving target tied to when you invest and which scheme you pick.

Both deliver a regular monthly sum, which makes it tempting to treat them as interchangeable, but the mechanics differ. A pension is usually an entitlement tied to years of service or contributions, and depending on the scheme it can continue for life with survivor benefits attached. A monthly income scheme is just interest on a fixed deposit for a fixed tenure — the payouts stop when the tenure ends unless you renew, and there is no built-in "for as long as you live" guarantee.

The practical takeaway for retirement planning: a pension (or an annuity bought to mimic one) protects against outliving your money, while a monthly income scheme generates cash flow from a corpus you keep owning and eventually get back. Many retirees hold both — a guaranteed-for-life income floor alongside a separate monthly-income or SWP arrangement for the rest.

• Principal: ₹1,00,000
• Annual rate: 7%
• Months: 60
• Illustrative monthly interest: ₹583
• Total interest (window): ₹35,000
• Total amount (principal + interest, illustrative): ₹1,35,000
• Estimated TDS at 10% (illustrative): ₹3,500
• Net interest after illustrative TDS: ₹31,500

Interest from monthly income schemes, POMIS, and similar fixed-income products is added to your total income and taxed at your slab rate — no special flat rate or capital-gains treatment applies. On the illustrative total interest of about ₹35,000 over 60 months here, a 10% TDS would work out to about ₹3,500, leaving roughly ₹31,500 net — though the actual TDS threshold, rate, and your final liability depend on your total income and the specific product's rules.

• TDS: banks and post offices may deduct TDS once interest crosses a threshold in a financial year, with a higher threshold typically available to senior citizens.
• Form 15G/15H: if your total income sits below the taxable threshold, filing Form 15G (or 15H for senior citizens) can help avoid TDS deduction — the interest still becomes taxable if your income later crosses the threshold.
• Advance tax: if your total tax liability, including this interest, exceeds the advance tax threshold, quarterly instalments may be required to avoid interest charges under Sections 234B/234C.

• Budgeting on the gross figure. The ₹583 shown here is pre-tax — your usable monthly cash flow is lower once tax and any TDS come out.
• Ignoring inflation. A fixed monthly payout buys less every year as prices rise — factor in a step-up or a supplement from other income for long retirement horizons.
• Assuming principal grows. This model, and real MIS-style products, keep principal flat and pay interest separately — do not expect the principal itself to increase over the tenure.
• Overlooking premature withdrawal penalties. Real schemes like POMIS penalise early exit — check the exact terms before assuming you can pull the principal out early at no cost.
• Investing above statutory limits without checking. Products like POMIS have investment ceilings — a large lumpsum may need to be split across accounts, family members, or a mix of products.

A monthly income scheme is one of several ways to generate regular cash flow from a lumpsum. Here is how it broadly compares with two alternatives:

Retirees often combine two or three of these: a government scheme or FD for a guaranteed floor, and an SWP from a mutual fund for growth potential and comparatively better tax efficiency on the remainder. The right mix depends on how much of your monthly need has to be guaranteed versus how much variability you can absorb in exchange for a potentially better long-run outcome.

• Retirees planning a monthly budget around interest income from a lumpsum, whether in a POMIS-style scheme, a non-cumulative FD, or a similar product.
• Anyone comparing monthly-payout products against SWP, to weigh guaranteed income against market-linked flexibility.
• Family members splitting a large lumpsum across single and joint accounts to stay within statutory limits on schemes like POMIS.
• Financial planners illustrating fixed-income mechanics to clients before recommending a specific real-world scheme.

₹1,00,000 at 7% for 60 months is projected to generate about ₹583 a month, or ₹35,000 in total interest over the period — before tax and before any TDS. Whether that is enough depends on your monthly budget, your other income, and how much inflation erodes its purchasing power over time. Use the sensitivity tables above to see how principal, rate, and horizon each move the outcome, and check this illustrative model against an actual scheme's rate, tenure, and investment limits — particularly POMIS — before committing a large sum.

Treat this page as a starting point for building intuition, not a final answer. The real decision should weigh your complete financial picture: other income sources, health and liquidity needs, and how comfortable you are locking up a large sum for a multi-year term without easy access to it.

Figures are computed live from the principal, annual rate, and number of months you entered, using a flat monthly interest estimate (monthly interest ≈ Principal × Rate ÷ 100 ÷ 12) with principal held constant throughout. Sensitivity tables recompute the same formula at nearby horizon, rate, and principal values. TDS and POMIS limit figures are illustrative and based on rules that are periodically revised by the government — confirm current thresholds before making a real investment decision. Nothing here is investment or tax advice.