India adds over 40 lakh new SIP accounts every month, and "SIP calculator" sits permanently in the top ten finance searches. The concept is simple — invest a fixed amount monthly — but the outcomes people expect are often off by a factor of two because of how compounding, step-ups and inflation interact.
The formula
Future value of a SIP with monthly investment M, monthly rate i (annual ÷ 12) over n months, invested at the start of each month:
FV = M × ((1 + i)^n − 1) ÷ i × (1 + i)
₹5,000/month at 12% for 20 years: n = 240, i = 0.01 → FV ≈ ₹49.9 lakh on ₹12 lakh invested. The SIP calculator shows the year-by-year growth table.
The three variables
1. Time (by far the biggest)
₹5,000/month at 12%:
| Years | Invested | Value |
|---|---|---|
| 5 | 3 lakh | 4.1 lakh |
| 10 | 6 lakh | 11.6 lakh |
| 15 | 9 lakh | 25.2 lakh |
| 20 | 12 lakh | 49.9 lakh |
| 25 | 15 lakh | 94.9 lakh |
| 30 | 18 lakh | 1.76 crore |
The last 10 years add more than the first 20. Starting at 25 instead of 35 roughly triples the corpus at 55.
2. Return
Equity funds in India have delivered 11–14% over long periods; debt 6–8%; a balanced mix 9–11%. Assume 12% for equity in planning and be pleasantly surprised. At 10% the 20-year figure above is ₹38 lakh; at 15% it is ₹75 lakh.
3. Step-up
Increasing the SIP by 10% every year (in line with salary growth) changes the 20-year outcome from ₹50 lakh to about ₹1.05 crore — you invest ₹34 lakh instead of ₹12 lakh, but the extra flows in late, when you can afford it. Toggle step-up in the calculator to see it.
Inflation: the number everyone forgets
₹50 lakh in 2046 buys what about ₹15.6 lakh buys today at 6% inflation. Plan goals in today's rupees and let the calculator's "real value" line keep you honest. For a goal of ₹1 crore in today's money 20 years away, you need about ₹3.2 crore nominal — roughly ₹32,000/month at 12%, or ₹14,000/month with a 10% annual step-up.
Tax
- Equity funds held over 12 months: 12.5% LTCG on gains above ₹1.25 lakh per year; under 12 months, 20%.
- Debt funds: gains taxed at your slab.
- ELSS gives 80C deduction only in the old regime — see should you still invest in 80C.
- No tax on the way in; no TDS on redemption for residents.
Lumpsum vs SIP
If you have a lumpsum, mathematically investing it all at once beats spreading it (markets rise more often than they fall). SIP wins behaviourally — you actually invest, and you don't panic at a dip. The calculator has both modes; the "goal" mode tells you the monthly SIP needed for a target.
Choosing a fund (in one paragraph)
One broad index fund (Nifty 50 or Nifty 500) plus, optionally, one flexi-cap active fund. Low expense ratio, direct plan, growth option. Don't buy five funds that hold the same stocks. Review once a year, not once a week.
FAQ
Is 12% a realistic SIP return?
For diversified equity over 10+ years, yes historically. Over any 3-year window, returns can be −10% to +30%; SIPs are for long horizons.
Can I stop or pause a SIP?
Yes, anytime, with no penalty (ELSS units have a 3-year lock-in per instalment).
What is the minimum SIP amount?
Many funds allow ₹100–500 per month; ₹1,000 is common.
SIP or PPF?
Different jobs. PPF is safe debt at ~7.1% with a 15-year lock-in; equity SIPs are for growth with volatility. Most people need both.