Got a ₹5 lakh bonus? Where each rupee should go first

A bonus, an insurance maturity or an inheritance lands in your account: ₹5 L. The temptation is to invest it all at once, or leave it in savings "until you decide".

Both skip the questions that come first. Here's the order our lumpsum planner works through, and why.

Step 1: fill the emergency fund

With ₹40,000 of monthly expenses, a 6-month fund is ₹2.4 L. You have ₹1 L, so ₹1.4 L of the bonus goes here first. Money you might need next month shouldn't be in the stock market, and a bank deposit is insured up to ₹5 lakh.^[1]

Step 2: clear costly debt

Credit card interest runs around 36–42% a year; personal loans 11–24%. No investment reliably beats those, so paying them off is the best "return" you'll get. A ₹1 L card balance takes the next ₹1 L.

Step 3: prepay the home loan, or invest?

Prepaying an 8.5% loan is a guaranteed, tax-free 8.5% return. Investing has to beat that after LTCG tax^[2] and with enough margin for its risk. The planner prepays when your expected return is within 2 points of the loan's break-even, about 9% here, and invests above it.

The prepay or invest calculator runs that comparison in detail for a monthly surplus.

All at once, or bit by bit?

• All at once ends highest when markets rise over time, which they usually have.
• An STP (systematic transfer) moves the money from a liquid fund into equity over 12 months. It ends slightly lower but softens the regret of investing just before a fall. If that fear would stop you investing at all, the STP is the better plan.
• An FD is safe but, after tax, barely beats inflation over 10 years.

What this doesn't mean

• Returns aren't guaranteed. 12% is a long-run equity figure; the planner also shows a cautious and an optimistic range.
• Goals come first. Money you need within three years, for a wedding or a down payment, belongs in safer options.
• Your bonus is already taxed. It arrives after TDS at your slab rate; these amounts are what's in your account.

New tax regime, so no 24(b) deduction on the home loan. Equity gains taxed at 12.5% LTCG above ₹1.25 lakh; FD interest at your slab. For illustration only, not investment advice.