SIP Calculator

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How it is calculated

Future value = P × (((1+i)^n − 1) ÷ i) × (1+i), where P is the monthly SIP amount, i is the monthly expected return (annual return ÷ 12 ÷ 100) and n is the number of monthly instalments. Your invested amount is P × n, and the estimated gain is the future value minus the invested amount. Returns are market-linked and not guaranteed.

What the projection is and is not

A SIP calculator applies a constant assumed rate of return to a regular monthly contribution. Real markets do not deliver a constant rate; they deliver a sequence, and the same average can produce materially different end values depending on when the good and bad years arrive. A projection is therefore a planning figure that shows the shape of compounding, not a forecast of what your investment will be worth on a particular date. Used properly it answers useful questions — roughly how much a given monthly amount accumulates over a given period, and how sensitive that is to the rate and the duration. Used improperly it becomes a promise, which is how investors end up disappointed by an outcome that was always within the normal range. Run it at more than one rate and treat the lower figure as the planning number.

Returns are not guaranteed, and past performance is not a rate

The most common modelling error is taking a fund's trailing return and using it as the assumed rate for the next twenty years. Equity returns over long periods have historically exceeded fixed income, but with wide variation and real drawdowns along the way, and a period that included an exceptional run is not a basis for extrapolation. Nothing in a mutual fund is guaranteed, including the capital. The practical approach is to model a conservative rate alongside an optimistic one and build the plan around the conservative figure, so that the optimistic outcome is upside rather than a requirement. A plan that only works at the optimistic rate is not a plan. This is also the reason to prefer a longer horizon: the range of outcomes narrows with time, though it never closes entirely.

Inflation is the number most people forget

A corpus that looks substantial in today's terms buys considerably less in twenty years, and a projection expressed in nominal figures systematically overstates what the money will actually do. If you assume a nominal return and ignore inflation, you will over-estimate your position by a wide margin over long horizons. The straightforward fix is to think in real terms: subtract expected inflation from your assumed return, and read the resulting corpus as approximately what it is worth in today's purchasing power. Then ask whether that figure meets the goal you had in mind. This matters most for goals with their own inflation rate that differs from the general one — education and healthcare costs have historically risen faster than headline inflation, so a plan built on the general rate can fall short of exactly the goals it was designed for.

Time in the market beats the size of the instalment

Compounding is far more sensitive to duration than to contribution size. Starting five years earlier with a smaller monthly amount frequently produces a larger corpus than starting later with a bigger one, because the early instalments have the longest time to compound and their growth is itself compounding. This is also why stopping a SIP during a market decline is so costly: those are precisely the instalments buying the most units, and skipping them removes the contributions that would have compounded from the lowest base. The behaviour that most reliably damages long-term outcomes is not choosing the wrong fund but interrupting the process. If the monthly amount becomes unaffordable, reducing it is far better than stopping, because the account stays live and the habit survives the period that would otherwise have broken it.

The tax treatment depends on the fund and the holding period

Each SIP instalment is a separate purchase with its own acquisition date, so a redemption draws units bought at different times and the holding period is determined per unit rather than per redemption. For equity funds, units held more than twelve months attract long-term capital gains tax at 12.5% on gains above the ₹1.25 lakh annual exemption, and shorter holdings attract 20%. Debt funds bought on or after 1 April 2023 get no long-term treatment at all and gains are added to income at slab rates however long they were held. ELSS adds a three-year lock-in that applies to each instalment separately, so the last instalment is locked for three years from its own date. Model the after-tax figure rather than the headline corpus, since the difference on a large redemption is significant.

Stepping up the instalment matters more than picking the fund

Investors spend a great deal of attention on fund selection and comparatively little on contribution size, when the second has the larger effect. Increasing the monthly instalment each year in line with income — a step-up — changes the outcome far more than the difference between a good fund and an average one over the same period, because it applies compounding to a rising base. Many platforms allow a step-up to be automated at a fixed percentage each year, which removes the decision from the annual to-do list. The same logic applies to windfalls: a bonus directed into the same investment does more than an equivalent effort spent switching funds. This is not an argument for ignoring costs or quality, but for putting them in proportion. The controllable variables in order of impact are duration, contribution, allocation, and only then selection.

Costs, and what to do when markets fall

Two practical points that projections omit. Costs: every fund charges an expense ratio deducted from returns, and equity funds commonly levy an exit load on units redeemed within a year. Direct plans carry lower expense ratios than regular plans because they exclude distributor commission, and over a long horizon that difference compounds into a meaningful sum. Behaviour: the most damaging thing an investor can do during a market decline is stop the SIP, because those instalments buy the most units and skipping them removes the purchases that would have compounded from the lowest base. If cash flow requires it, reduce the amount rather than stopping. Reviewing the allocation every few years is sensible; reacting to a quarter is not. The plan you can keep through a bad year is worth more than the optimal plan you abandon.

Frequently asked questions

Does the projected figure account for inflation?

No — it is a nominal figure, so it overstates what the money will actually buy. Subtract expected inflation from your assumed return and read the result as today's purchasing power. This matters most for education and healthcare goals, which have historically risen faster than headline inflation.

Should I stop my SIP when the market falls?

No — those instalments buy the most units and skipping them removes the purchases that would compound from the lowest base. If cash flow requires it, reduce the amount rather than stopping. The plan you can keep through a bad year is worth more than the optimal plan you abandon.

What is a step-up SIP and does it help?

It increases the monthly instalment each year, usually by a fixed percentage, and it affects the final corpus more than the difference between a good fund and an average one — because it applies compounding to a rising base. Most platforms can automate it.

Are SIP returns guaranteed?

No. Mutual-fund SIP returns are market-linked and vary with fund performance. The calculator's figure is an estimate based on an assumed average return, not a guarantee.

Is SIP better than a lump sum?

SIP averages your purchase cost over time (rupee-cost averaging) and suits regular savers; a lump sum can do better in a rising market but carries timing risk. They suit different situations.

Is equity-mutual-fund gain taxable?

Long-term capital gains on equity funds are taxed at 12.5% above the ₹1.25 lakh annual exemption, and short-term at 20% (verify current rates). Each SIP instalment has its own holding period.

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