How SIP Calculator Works
Systematic Investment Plan (SIP) lets you invest a fixed amount in mutual funds every month. The power of compounding plus rupee-cost-averaging makes SIP one of the most effective wealth-building strategies for Indian investors.
SIP Future Value Formula:
M = P × ({(1+i)^n - 1} / i) × (1+i)
Where:
M = Maturity amount
P = Monthly SIP investment
i = Monthly rate (Annual rate / 12 / 100)
n = Total months (Years × 12)
Example Calculation
SIP: ₹10,000/month for 15 years at 12% expected return
P = ₹10,000
i = 12%/12 = 1% per month = 0.01
n = 15 × 12 = 180 months
Total Invested = ₹10,000 × 180 = ₹18,00,000
Maturity Value ≈ ₹50,45,759
Wealth Gained = ₹32,45,759 (more than 1.8x of invested!)
Expected Returns by Fund Category
| Fund Type | Risk | Expected Return | Recommended Tenure |
|---|
| Large Cap Equity | Moderate | 10-13% | 5+ years |
| Mid Cap Equity | High | 12-16% | 7+ years |
| Small Cap Equity | Very High | 15-22% | 10+ years |
| ELSS (Tax-saving) | Moderate-High | 11-14% | 3+ years (lock-in) |
| Hybrid Funds | Moderate | 9-12% | 5+ years |
| Debt Funds | Low | 6-8% | 3+ years |
| Liquid Funds | Very Low | 5-7% | Short term |
SIP Benefits
- Rupee Cost Averaging: Buy more units when market is low, fewer when high - averages out cost
- Power of Compounding: Returns earn returns. A ₹5,000 SIP at 12% becomes ₹50 lakh in 25 years
- Discipline: Auto-debit ensures consistent investing regardless of market mood
- Flexibility: Start with ₹500/month, increase via Step-up SIP
- No Market Timing Stress: Spreads risk across market cycles
- Tax Efficient: ELSS SIPs qualify under Section 80C (₹1.5L deduction)
Step-up SIP - Boost Your Returns
Increase SIP by 5-10% every year. Example: Start ₹10K SIP, increase by 10% annually. After 15 years at 12% return, corpus jumps from ₹50L (constant SIP) to ₹89L (step-up SIP) - a 78% boost!
SIP Tax Implications
- Equity Funds: LTCG (held > 1 yr) taxed at 12.5% above ₹1.25L gain. STCG at 20%
- Debt Funds: Both LTCG and STCG taxed at slab rate (post April 2023)
- ELSS: Investment qualifies for 80C, gains taxed as equity LTCG
- SIP withdrawal: Each SIP installment treated separately for holding period (FIFO)
FAQs
Q: What is the minimum SIP amount?
Most mutual funds allow SIPs starting from ₹500/month. Some allow ₹100 minimum. Better to start small than not start at all.
Q: Can I stop SIP anytime?
Yes, SIP can be stopped/paused/modified anytime. No penalty. Just submit stop request 7-15 days before next SIP date. Existing units stay invested.
Q: SIP vs Lump sum - which is better?
SIP wins for most investors due to rupee cost averaging and discipline. Lump sum better only if you have a large amount AND markets are clearly low. For salaried, SIP fits cash flow.
Q: Is SIP guaranteed return?
No. Mutual funds are market-linked. The 12% return is historical average for equity funds, not guaranteed. Could be higher or lower in any specific period. Long tenure (10+ yrs) reduces risk.