SIP Calculator
| Year | Invested So Far (₹) | Returns (₹) | Total Value (₹) |
|---|---|---|---|
| 1 | 60,000 | 4,047 | 64,047 |
| 2 | 1,20,000 | 16,216 | 1,36,216 |
| 3 | 1,80,000 | 37,538 | 2,17,538 |
| 4 | 2,40,000 | 69,174 | 3,09,174 |
| 5 | 3,00,000 | 1,12,432 | 4,12,432 |
| 6 | 3,60,000 | 1,68,785 | 5,28,785 |
| 7 | 4,20,000 | 2,39,895 | 6,59,895 |
| 8 | 4,80,000 | 3,27,633 | 8,07,633 |
| 9 | 5,40,000 | 4,34,108 | 9,74,108 |
| 10 | 6,00,000 | 5,61,695 | 11,61,695 |
Mutual fund investments are subject to market risks. Past returns do not guarantee future performance. This calculator provides estimates only. Consult a SEBI-registered investment adviser before investing.
What is SIP?
SIP — Systematic Investment Plan — is a method of investing a fixed rupee amount into a mutual fund at regular intervals, typically monthly. Instead of timing the market with a large lump sum, SIP lets you invest small amounts consistently over time. Each instalment purchases mutual fund units at the current Net Asset Value (NAV), so your cost basis spreads across different market levels.
SIP is not a product — it is a disciplined investment habit. You choose the mutual fund scheme, the amount, and the date, and the money is auto-debited from your bank account every month. Most AMCs (Asset Management Companies) allow SIPs starting at ₹500 per month, making equity investing accessible to anyone with a regular income.
The power of SIP comes from two forces working together: Rupee Cost Averaging (which smooths out market volatility) and compounding (where returns generate their own returns over time). A ₹5,000 monthly SIP at 12% for 20 years grows to over ₹49 lakh — on an investment of just ₹12 lakh. The ₹37 lakh surplus is entirely from compounding.
SIP Formula
The future value of a SIP is calculated using the future value of an annuity formula, adjusted for beginning-of-period payments:
FV = P × [((1+r)^n − 1) ÷ r] × (1+r)
Where each variable means:
| Variable | Meaning | Example |
|---|---|---|
| FV | Future value (maturity amount) | ₹11,61,695 |
| P | Monthly SIP amount | ₹5,000 |
| r | Monthly return rate = Annual rate ÷ 12 ÷ 100 | 12% ÷ 12 ÷ 100 = 0.01 |
| n | Total number of months | 120 (10 years) |
Worked Example — Step by Step
₹5,000 per month at 12% annual return for 10 years:
SIP vs Lump Sum — Comparison
Both SIP and lump-sum use the same mutual fund, but they behave very differently depending on market conditions. The table below compares both strategies on ₹6 lakh invested over 10 years at an assumed 12% return:
| Metric | SIP (₹5,000/month for 10 years) | Lump Sum (₹6 lakh upfront) |
|---|---|---|
| Total Invested | ₹6,00,000 | ₹6,00,000 |
| Maturity Value | ₹11,61,695 | ₹18,58,929 |
| Wealth Gain | ₹5,61,695 | ₹12,58,929 |
| Market Timing Risk | Low — averaged over 120 months | High — invested on one date |
| Best for | Salaried investors with monthly income | One-time surplus e.g. bonus, inheritance |
| Requires discipline? | Auto-debit removes the need | No ongoing action needed |
Lump sum wins mathematically in a consistently rising market because all ₹6 lakh compounds for the full 10 years. SIP only gets the full 10-year compounding on the first instalment; the last instalment gets just one month. However, in volatile markets, SIP's Rupee Cost Averaging can narrow or erase this gap — and for most salaried investors, SIP is the only practical option since they don't have ₹6 lakh available on day one.
Power of Compounding in SIP
Compounding is the reason long-duration SIPs are dramatically more powerful than short ones. The table below shows ₹5,000 monthly SIP at 12% across different periods:
| Period | Invested (₹) | Maturity Value (₹) | Wealth Gain (₹) | Wealth Multiple |
|---|---|---|---|---|
| 5 years | 3,00,000 | 4,08,348 | 1,08,348 | 1.36x |
| 10 years | 6,00,000 | 11,61,695 | 5,61,695 | 1.94x |
| 15 years | 9,00,000 | 25,22,880 | 16,22,880 | 2.80x |
| 20 years | 12,00,000 | 49,95,740 | 37,95,740 | 4.16x |
| 25 years | 15,00,000 | 94,88,184 | 79,88,184 | 6.33x |
| 30 years | 18,00,000 | 1,76,49,569 | 1,58,49,569 | 9.81x |
Notice how the wealth multiple jumps from 1.36x at 5 years to 9.81x at 30 years. This is compounding at work — each year, returns are generated on top of all previous returns. The same ₹5,000 monthly contribution turns into nearly ₹1.76 crore over 30 years on an investment of just ₹18 lakh. The key insight: starting early matters more than investing large amounts. Starting a SIP 5 years earlier often outperforms doubling the SIP amount started later.
The concept of the Step-Up SIP takes this further. By increasing your SIP amount by 10% every year (roughly in line with salary increments), the maturity value grows dramatically more than a flat SIP. A ₹5,000 SIP stepped up 10% annually for 20 years can reach over ₹1 crore — nearly double a flat ₹5,000 SIP over the same period.
Frequently Asked Questions
What is SIP and how does it work?
SIP (Systematic Investment Plan) is a method of investing a fixed amount in a mutual fund at regular intervals — typically monthly. Each instalment buys units at the prevailing NAV (Net Asset Value). Over time, you accumulate units at different prices, averaging out the cost — this is called Rupee Cost Averaging. SIP is not a type of mutual fund; it is a mode of investing into any mutual fund scheme.
Is the 12% return rate realistic for a SIP?
The Indian equity market (Nifty 50) has delivered approximately 12–14% CAGR over the last 20 years. However, past returns do not guarantee future results, and actual returns can vary significantly year to year. Equity funds targeting Nifty 50 or Nifty 500 have historically been closer to 12% over 10+ year periods. Debt funds return 6–8%, and hybrid funds 8–10%. Always choose a return assumption based on the fund category, not just historical highs.
How is SIP different from a lump-sum investment?
A lump-sum investment deploys all your money at once, exposing you to market timing risk. SIP spreads investments over time, reducing this risk through Rupee Cost Averaging. When markets fall, your SIP buys more units; when markets rise, fewer units — the average cost stays moderate. SIP is better for salaried investors who receive regular income. Lump-sum can outperform SIP if invested at the right time in a rising market, but this requires market timing skill.
Can I pause or stop a SIP anytime?
Yes. SIPs have no lock-in period (except ELSS SIPs, which have a 3-year lock-in per instalment). You can pause a SIP for 1–3 months or stop it permanently with no penalty. Existing units remain invested and continue to grow. You can also step up your SIP amount annually — called a Step-Up SIP — which is a powerful strategy as your income grows.
How are SIP returns taxed in India?
Each SIP instalment is treated as a separate investment for tax purposes. For equity mutual funds, gains on units held for more than 12 months are Long Term Capital Gains (LTCG), taxed at 12.5% above ₹1.25 lakh per year (as of FY 2024-25). Units held for less than 12 months attract Short Term Capital Gains (STCG) at 20%. For debt funds, all gains are added to income and taxed at your slab rate.
What is Rupee Cost Averaging in SIP?
Rupee Cost Averaging means that because you invest a fixed amount each month, you automatically buy more units when prices are low and fewer when prices are high. For example: Month 1 NAV ₹100, you buy 50 units; Month 2 NAV ₹80, you buy 62.5 units; Month 3 NAV ₹120, you buy 41.7 units. Average cost = ₹1,500 ÷ 154.2 units = ₹9.73 per unit, below the average NAV of ₹100. This built-in averaging is one of the biggest advantages of SIP over lump-sum investing.
Related Calculators
- Lumpsum Calculator — Calculate returns on a one-time mutual fund investment
- Step-Up SIP Calculator — SIP with annual increase in investment amount
- PPF Calculator — Public Provident Fund maturity value over 15 years
- EMI Calculator — Calculate loan EMI with full amortization table
- Compound Interest Calculator — Compare compounding frequencies on a lump sum