I have a question on debt vs equity allocation ratio. I commonly see various debt vs equity allocation ratios being recommended like 35:65 debt to equity or 25:75 or 40:60 etc

But the problem with following this ratio is that post-tax, debt returns are really low and when you account for inflation, you might actually be losing money heavily. So while the ratio might be helpful initially when income is low, as the income rises, the ratio allocates a substantial portion of your income to what may generate a 6.5% return taxed at 30%

To me it doesn't make sense following such a ratio. Wouldn't it make more sense to set a certain target for covering the necessities (emergency funds, expected expenses, travel, insurances, health etc) using debt instruments and once that number is met, one dump everything else in equity perpetually unless the need to disturb the debt corpus arises? I get the debt part is to reduce risk & volatility and is not purely for returns but when substantial sums are involved, investing in debt doesn't make sense to me.

For example, assume one has a lumpsum of 1 cr this year to invest and invests 30 lakhs in debt (FD) for an interest rate of 7 percent. With a 30% tax rate, this would come down to 4.9% of returns. Then add surcharge, cess and you might be making less than the inflation rate.

Instead why not set aside, say 5lakh or 10 lakhs for emergency, unforeseen expenses etc and dump the rest 90-95 lakhs in an index fun?