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SIP Calculator 2026: How SIPs Work

Understand SIP math, compounding, XIRR vs CAGR, rupee-cost averaging, and step-up SIPs. Includes realistic return expectations for Indian mutual funds.

PushDraft Team •

A Systematic Investment Plan (SIP) is a way to invest a fixed amount into a mutual fund at regular intervals — usually monthly. Instead of trying to time the market, you buy units consistently, which smooths out price volatility and builds a habit of investing.

The SIP Math

For a monthly SIP of amount P over n months at an expected monthly return r:

$$FV = P \times \frac{(1+r)^n - 1}{r} \times (1+r)$$

Example: ₹10,000/month for 20 years at 12% annual return

  • P = ₹10,000
  • r = 12% ÷ 12 = 1% (0.01)
  • n = 240

Future value ≈ ₹99.91 lakh

You invested ₹10,000 × 240 = ₹24 lakh. The rest — ₹75.91 lakh — is the power of compounding.

The Compounding Curve Is Non-Linear

This is the most misunderstood part of SIPs. Your corpus doesn’t grow steadily — it accelerates sharply in the later years.

For the ₹10,000/month SIP at 12%:

YearInvestedCorpusGains
5₹6L₹8.2L₹2.2L
10₹12L₹23.2L₹11.2L
15₹18L₹50.5L₹32.5L
20₹24L₹99.9L₹75.9L
25₹30L₹1.9Cr₹1.6Cr
30₹36L₹3.5Cr₹3.14Cr

Year 25 to year 30 adds ₹1.6Cr to your corpus even though you only invest an extra ₹6L. This is why starting early matters more than starting big.

Rupee-Cost Averaging: Why SIPs Beat Lump Sum in Volatile Markets

When markets fall, your fixed monthly amount buys more units. When markets rise, it buys fewer units. Over time, your average purchase price is lower than the market average — this is called rupee-cost averaging.

However, in a persistently rising market, lump-sum investing outperforms SIPs simply because your money has more time in the market. Historical Nifty 50 data shows lump-sum wins about 65% of the time for 10+ year horizons. SIPs win during high-volatility periods and when you don’t have a lump sum to invest anyway.

Realistic Return Expectations

Most SIP calculators show projections at 12% or 15%. These are optimistic. Historical data for Indian equity mutual funds:

  • Large-cap funds: 10-12% long-term CAGR
  • Mid-cap funds: 12-15% long-term CAGR (higher volatility)
  • Small-cap funds: 14-18% long-term CAGR (much higher volatility)
  • Index funds (Nifty 50): 11-12% long-term CAGR
  • Debt funds: 6-8% CAGR

For planning, use 11-12%. Anything higher is a best-case assumption that depends on the specific decade and fund manager.

CAGR vs XIRR — Why Your Fund’s “15% Return” Isn’t What You Earned

CAGR (Compound Annual Growth Rate) is the return if you invested a single lump sum on day one. XIRR is the actual return accounting for multiple cash flows at different times — which is what SIPs are.

Your SIP’s XIRR is almost always lower than the fund’s CAGR, because your later installments had less time to compound. A fund showing 15% CAGR might give you an XIRR of 12-13% on your SIP. This isn’t a scam — it’s arithmetic.

Step-Up SIPs: The Underrated Tool

A step-up SIP increases your monthly contribution by a fixed percentage every year (usually 10%). If your salary rises with inflation, your SIP should too.

₹10,000/month SIP with 10% annual step-up, 20 years, 12% return:

  • Total invested: ₹68.73L (vs ₹24L with flat SIP)
  • Final corpus: ₹1.83 Cr (vs ₹99.91L)

Nearly double the corpus because you automatically invest more as your income grows.

Tax on SIP Gains

  • Equity funds (65%+ equity): LTCG after 1 year at 12.5% above ₹1.25L/year exemption. STCG at 20%.
  • Debt funds: Taxed as per your slab (no LTCG benefit after April 2023 rules).
  • ELSS (equity-linked savings scheme): 3-year lock-in, qualifies for Section 80C (old regime only).

Each SIP installment has its own holding period. If you bought units 3 months ago and 3 years ago and redeem both, the 3-year-old units get LTCG treatment; the 3-month-old ones get STCG.

Common SIP Mistakes

  1. Stopping during market crashes. This is the single most expensive mistake. The entire benefit of rupee-cost averaging comes from buying during the crash.
  2. Chasing last year’s top fund. Funds rotate. A five-star fund today may be below average three years from now. Stick with broad index funds or proven diversified equity funds for SIP.
  3. Too many funds. Owning 10 mutual funds doesn’t diversify more — it just overlaps. Three to four funds maximum.
  4. Treating SIP as emergency fund. Equity SIPs are for 7+ year horizons. Keep emergency money in a savings account or liquid fund.

Use Our SIP Calculator

Our SIP Calculator lets you model step-up SIPs, compare flat vs stepped scenarios, and see year-by-year corpus growth. Use the Compound Interest Calculator to compare SIPs against lump-sum alternatives like FDs or PPF.