Express Money: Ask Us

I am a senior citizen and have an income of Rs 1 lakh from various investments. I would like to invest for my grandson who is 9 years old. I would like to invest for his higher studies. How should I proceed? Can I invest up to Rs 20,000 per month for him?   

— Shehnaaz Maneck

It is good to know that you have decided to plan much earlier. 8-10 years is a good time span to create a good corpus. I would suggest you to please keep a certain part of your income for an emergency. You may need such amount for yourself. Rs 20,000 a month is a good amount and you will be able to build decent corpus for your grandson. It would be good to invest in some part in equity mutual funds and some part in balanced fund. Equity mutual funds invest their major part in equities and hence they provide better return in the longer term.

However, the value of equity mutual funds fluctuates widely in short term. As you said your time horizon is 8-10 years, you will be able to build good corpus. Typically, equity mutual funds provide a return of 12 per cent to 18 per cent CAGR over longer time. The other fund is balanced fund which invest a part in equity and a part in debt. This means, there will be lower risk than the equity mutual funds but the prospect of returns is also low. Balanced funds, in general, provide a return of 8 per cent to 15 per cent. By dividing your money in both funds, you can achieve a return of 12 per cent to 14 per cent over 8-10 years which will build about 45 lakh.

My gross salary is Rs 28,000 and I want to know that how much tax will be deducted from my salary and how can I save that tax.

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