What Is a Child Education Plan?
A child education plan is the process of calculating the future cost of your child’s higher education and systematically investing to reach that goal. Because education costs rise at 10-12% per year in India, a course costing ₹5.00 L today could cost ₹17.26 L by the time your child is ready.
This calculator shows both the target corpus needed and whether your current monthly SIP of ₹5,000 is enough to reach it. If there is a shortfall, it tells you exactly how much additional you need to invest each month to bridge the gap.
How to Plan for Education Costs: Three Steps
- Estimate the future cost: take the current cost of the course your child is likely to pursue and apply the expected education inflation rate over the years until they start. This calculator does this automatically using Future Cost = Current Cost x (1 + Inflation)Years.
- Calculate the required monthly investment: based on the target corpus, existing savings, years available, and expected return, adjust the monthly SIP slider until the projected corpus matches or exceeds the future education cost.
- Choose appropriate investment vehicles: for horizons of 10+ years, invest in equity-oriented mutual funds via SIP for growth. As the goal approaches within 3-5 years, gradually shift to debt funds or fixed deposits to protect the corpus from market volatility.
The SIP Growth Formula Behind This Calculator
Monthly Compounding: Corpus += Monthly SIP, then Corpus += Corpus x (Annual Return / 12 / 100)This calculator compounds monthly rather than using a flat annual approximation, matching how mutual fund NAVs actually accrue returns. A monthly SIP of Rs 10,000 for 13 years at 12% grows to approximately ₹37,59,311, of which roughly 59% is investment growth, not principal.
Should You Use Insurance Plans for Education Savings?
Generally, no. Child education insurance plans combine insurance with investment, but typically invest in debt instruments and charge high commissions, resulting in net returns of just 5-7%.
A separate term insurance plan for protection, combined with an equity mutual fund SIP for growth, gives both adequate life cover and higher corpus growth than a bundled plan, an approach often called “buy term, invest the rest.”
Sukanya Samriddhi Yojana for a Girl Child
For a girl child under 10, Sukanya Samriddhi Yojana currently pays 8.2% per annum, tax-free and government-backed, with Section 80C benefit on contributions. Up to 50% of the balance can be withdrawn once she turns 18 or completes class 10, specifically for education.
Use the Sukanya Samriddhi Yojana Calculator alongside this planner. SSY works well as the guaranteed, lower-risk portion of a broader education corpus, with an equity SIP covering the rest.
Bridging a Shortfall With an Education Loan
If the shortfall shown above is large, an education loan can cover the gap. Under Section 80E, the entire interest paid is deductible with no upper limit, for up to 8 years from when repayment starts or until the interest is fully paid, whichever comes first.
Many families use a combination: the accumulated corpus covers 60-70% of the cost, with a loan covering the remainder, keeping post-course EMIs manageable. PM-Vidyalaxmi also offers collateral-free loans up to Rs 7.5 lakh at select institutions.
Can Scholarships Reduce What You Need to Save?
Yes, but be conservative. If your child is likely to qualify for merit-based scholarships, you can reduce the target corpus by the expected amount. It is safer, however, to plan for the full cost and treat any scholarship as a bonus that lowers your actual outlay.
The National Scholarship Portal lists 140+ central and state scholarship schemes. Check eligibility early since most applications open each June with an October 31 deadline for the academic year.
A Step-Up SIP Closes the Gap With Education Inflation Faster
Yes, meaningfully. A flat Rs 10,000/month SIP at 12% for 20 years grows to roughly Rs 1 crore. The same SIP with a 10% annual step-up, increasing the monthly amount every year in line with a typical salary increment, grows to roughly Rs 2.4 crore, nearly 2.4 times more.
A step-up SIP is a better match for education planning than a flat SIP, since education costs themselves compound at 10-12% a year. Use the Wealth Growth Calculator to model a step-up scenario for this same goal.
How the Final Corpus Gets Taxed When You Withdraw
Equity mutual fund gains held over 12 months are long-term capital gains, taxed at 12.5% on the amount above a Rs 1.25 lakh annual exemption, per Budget 2024 rules. Gains held under 12 months are short-term and taxed at 20%.
Because the exemption applies per financial year, withdrawing the corpus over 2-3 years around the admission date, rather than all at once, can meaningfully reduce the tax on the final payout compared to a single lump-sum redemption.
If a Grandparent Gifts Money, Whose Income Is It for Tax
A gift itself is not taxed since grandparents are relatives under the Income Tax Act. Any investment income earned on that gifted money, interest, dividends, or capital gains, is clubbed with the income of whichever parent has the higher total income, under Section 64(1A).
Parents get a small exemption of Rs 1,500 per child per year against this clubbed income. If a large sum is being invested toward this corpus, factor the clubbing rule into which parent’s tax slab absorbs the impact.
How to Use This Calculator
- Enter your child's current age and education start age: this sets the number of years available to invest.
- Enter current education cost and inflation rate: the calculator projects the future cost automatically.
- Click "Savings & returns": to enter existing corpus, expected return, and your planned monthly SIP.
- Check the shortfall or surplus banner: if there is a shortfall, the calculator shows the additional monthly SIP needed to close it.
- Expand "Year-by-Year Growth": to see the full projection table and bar chart of how the corpus builds each year.
Plan your child's education funding with a CA
A CA can model Section 80E and 80C deductions, SSY contributions, and the best mix of SIP and loan for your goal.
Frequently Asked Questions
Disclaimer: All calculations on this page are indicative estimates based on the inputs you provide and assume constant inflation and return rates over the full horizon. Actual mutual fund returns and fee increases vary by year. This calculator is for educational and planning purposes only and does not constitute financial advice. CAs can generate detailed education funding plans and Tax Optimization Reports for clients at ca.fermor.in.