How SIP returns are calculated
A Systematic Investment Plan (SIP) lets you invest a fixed amount in a mutual fund every month. Each month's investment buys units at the prevailing NAV (Net Asset Value). Over time, you accumulate units at different prices — this averaging effect across market cycles is called rupee-cost averaging, and it reduces the risk of investing a large sum at the wrong time.
The SIP formula
The standard formula for SIP maturity value is:
FV = P × [((1+i)ⁿ − 1) / i] × (1+i)
- P = Monthly SIP amount
- i = Monthly return rate = annual return ÷ 12
- n = Total months = years × 12
- FV = Future value (total corpus)
Worked example — ₹10,000/month for 10 years at 12%
| Detail | Value |
|---|---|
| Monthly SIP | ₹10,000 |
| Duration | 10 years (120 months) |
| Annual return | 12% |
| Monthly rate (i) | 12% ÷ 12 = 1% |
| Total invested | ₹10,000 × 120 = ₹12,00,000 |
| Total corpus (FV) | ≈ ₹23,23,391 |
| Estimated returns | ≈ ₹11,23,391 |
Your money nearly doubles in 10 years at 12% — that is the power of compounding. At 15 years the corpus grows to approximately ₹50 lakh, and at 20 years to over ₹1 crore, even with the same ₹10,000 monthly investment.
What return rate should I use?
The return rate you enter is an assumption, not a guarantee. Here are typical historical averages for Indian mutual funds over long periods (10+ years):
| Fund category | Typical long-term return |
|---|---|
| Large-cap equity funds | 10–12% per year |
| Flexi-cap / multi-cap funds | 12–14% per year |
| Mid-cap equity funds | 14–16% per year |
| Small-cap equity funds | 15–18% per year (high volatility) |
| Hybrid / balanced funds | 9–11% per year |
| Debt funds | 6–8% per year |
| Index funds (Nifty 50) | 11–13% per year |
For conservative planning, use 10–11%. For equity-heavy portfolios over 15+ years, 12% is a reasonable assumption. Do not use rates above 15% for planning — they represent the best-case scenario, not a base case.
Tax on SIP returns
Mutual fund returns are subject to capital gains tax, which depends on the holding period and fund type:
- Equity funds held less than 1 year: Short-term capital gains (STCG) at 20%.
- Equity funds held more than 1 year: Long-term capital gains (LTCG) at 12.5% on gains above ₹1.25 lakh per year.
- Debt funds: Gains taxed at your income tax slab rate (no LTCG benefit since April 2023).
For long-term SIPs (10+ years), the effective tax drag is lower because each monthly instalment starts its own 1-year holding period clock. Instalments from 13+ months ago are eligible for LTCG rates when you redeem.
This calculator shows pre-tax returns. Actual post-tax corpus will be lower depending on your redemption timing and gains amount.
Frequently asked questions
What is the SIP return formula?
What is a realistic SIP return rate for Indian equity funds?
Is SIP better than lump sum?
How is SIP taxed in India?
Can I pause or stop a SIP?
Disclaimer: This calculator assumes a constant annual return rate throughout the investment period. Actual mutual fund returns vary year to year and past performance does not guarantee future results. This is for illustrative purposes only and is not investment advice. Please consult a SEBI-registered investment adviser before investing.