How the SIP calculator works
A Systematic Investment Plan (SIP) is a fixed contribution to a mutual fund on a recurring schedule—most commonly monthly, often on a date that aligns with your salary. Each instalment buys whatever number of fund units the prevailing NAV allows, so you accumulate more units when markets are weak and fewer when markets are hot. Over a long enough horizon this rupee-cost-averaging effect, combined with compound growth of returns earned on returns, turns even modest monthly amounts into significant corpora.
The maths behind the projection
For an end-of-period SIP at a constant rate, the future value follows the standard annuity formula:
FV = P × [(1 + r)n − 1] / r
where P is each contribution, r is the per-period interest rate (monthly rate = annual / 12 / 100) and n is the total number of periods. With ₹10,000 per month at a 12% expected annual return for 20 years, that resolves to roughly ₹99 lakh of corpus on ₹24 lakh of total outlay—the rest is compounded growth. Our calculator uses high-precision decimal arithmetic so the projection stays accurate to the rupee even at the far end of a 60-year horizon.
End-of-period vs beginning-of-period
Indian SIPs almost always debit at the end of the period. Switching to beginning-of-period contributions (sometimes called “annuity due”) gives each instalment one extra compounding cycle and bumps the final corpus by roughly the per-period rate—about 1% for a monthly SIP at 12% annual return. The radio buttons in the form let you compare both modes.
Step-up SIP — the salaried-investor lever
A flat ₹10K SIP today is a different burden in year 20 than it was on day one—inflation has eroded its real weight while your salary has likely doubled or tripled. Step-up SIPs match the contribution to income growth: a 10% annual step-up means your year-2 SIP is ₹11,000, year-3 ₹12,100, and so on. Over 20 years at 12% return, a 10% step-up SIP starting at ₹10,000/month produces roughly ₹2 crore versus ₹1 crore for the flat SIP—the additional contributions have less time to compound but the dollar-weighted average is much larger.
Lumpsum on top
If you have a windfall (bonus, ESOP vest, parental gift), pairing a one-time lumpsum with an ongoing SIP gives the lumpsum the longest possible compounding runway. ₹1 lakh invested today at 12% for 20 years compounds to ₹9.65 lakh on its own—that contribution sits behind every monthly SIP rupee and grows with all of them.
Real returns vs nominal returns
The 12% headline return is nominal. India’s long-run inflation has averaged 6–7%, so the real (purchasing-power-adjusted) return on a 12% nominal SIP is closer to 5–6%. The inflation field on the form discounts the nominal corpus back to today’s rupees so you can compare it to today’s expense base. A ₹1 crore corpus 20 years from now at 6% inflation has the same purchasing power as ₹31 lakh today.
Realistic return assumptions
Long-run rolling-return data from AMFI and Value Research suggests:
- Equity-oriented funds (large-cap / flexicap) — 11–14% nominal CAGR over 15+ year horizons; volatile in any single year.
- Index funds (Nifty 50 / Nifty 500) — very close to the underlying index, typically 11–13% over decades.
- Hybrid / aggressive hybrid — 9–11% nominal, less volatile than pure equity.
- Debt funds — 6–8% nominal, slab-rate taxed for purchases after 1-Apr-2023.
Avoid plugging in the 25–30% returns from a bull-run year. Use the 15-year rolling median to set realistic expectations.
SIP vs lumpsum — which wins?
Mathematically, a lumpsum invested at the start has more compounding time than the same total amount drip-fed via SIP. If markets only ever went up in a straight line, lumpsum would always win. In reality markets volatility favours SIP because rupee-cost averaging buys more units at lower prices. The break-even depends on how the market path plays out across your investment window—and since nobody knows that ex-ante, SIP is the lower-regret default for most retail investors.
Tax treatment of SIP redemptions
Each SIP instalment counts as a separate purchase for capital-gains purposes (FIFO matching). On equity funds, gains within 12 months are STCG taxed at 20% (post Budget 2024); gains held beyond 12 months are LTCG taxed at 12.5% above the ₹1.25 lakh annual exemption. Debt funds bought after 1-Apr-2023 are taxed at slab rate regardless of holding period. Our capital gains calculator handles the redemption math.
Frequently asked questions
- Is the displayed corpus guaranteed?
- No. Mutual fund returns are market-linked and not guaranteed. The calculator uses your assumed annual return, but actual outcomes will vary year to year and across funds. Use the 15-year rolling median return of your fund category as a baseline.
- Should I stop SIP during a market crash?
- Mathematically the opposite—market crashes are when SIP buys the most units, dragging down your average cost. The historical evidence is overwhelming that pausing SIPs in drawdowns hurts long-term returns. The behavioural challenge is staying the course; automating via standing instructions helps.
- Can I increase or skip a SIP instalment?
- Step-up SIPs let you schedule annual increases. Most platforms allow you to pause an SIP for up to 6 months without cancelling the mandate. Skipping individual instalments is not supported by the standard ECS mandate, but you can stop and restart the SIP.
- How accurate is this calculator?
- Every result is computed with high-precision decimal arithmetic and cross-checked against published Groww and Value Research SIP calculators. Seventeen real-world fixture rows and 1,000+ property-based assertions run on every commit.
Sources
- AMFI rolling-return data (
amfiindia.com) - Value Research category-wise long-term returns
- SEBI Mutual Fund Regulations, 1996 (current)
- CBDT capital gains amendments via Finance Act 2024
Disclaimer. Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. MoneyKit projections are illustrative only—consult a SEBI- registered investment advisor before making fund selections or finalising your asset allocation.