Introduction
SIP stands for Systematic Investment Plan, which is a method of investing a fixed amount of money in a mutual fund scheme at regular intervals. SIP calculator is a tool that helps you calculate the expected return on your SIP investment.
Small monthly amounts become surprising numbers over time. ₹5,000/month at 12% annual returns over 10 years doesn't give you ₹6 lakh. It gives you ₹11.6 lakh — because each instalment compounds from the month it's invested, not from the end.
That gap between "what you put in" and "what you get back" is the entire reason to start a SIP earlier rather than later.
How the SIP Calculator Works
SIPs use a compound interest formula — not simple interest, and not the lump sum formula. Each monthly instalment is invested separately and compounds from its own start date.
The correct formula:
M = P × [{(1 + i)^n − 1} / i] × (1 + i)
Where:
- M = Maturity value (the total corpus you receive)
- P = Monthly SIP investment amount (₹)
- i = Monthly interest rate = Annual return ÷ 12 (12% annual return → i = 0.12 ÷ 12 = 0.01)
- n = Total number of monthly instalments (10 years → n = 120)
Example — ₹5,000/month for 10 years at 12% p.a.
- P = ₹5,000 · i = 0.01 · n = 120
- M = 5,000 × [{(1.01)^120 − 1} / 0.01] × 1.01
- M = 5,000 × [2.3004 − 1 / 0.01] × 1.01
- M ≈ ₹11,61,695
Total invested = ₹5,000 × 120 = ₹6,00,000 Estimated gains = ₹5,61,695 — almost equal to what you put in.
⚠️ SIP returns are market-linked and not guaranteed. This calculator uses a fixed expected annual return for illustration. Actual mutual fund returns vary by fund, market conditions, and time period.
Tax Benefit on ELSS SIPs (Section 80C) — FY 2025-26
If your SIP is in an ELSS (Equity-Linked Savings Scheme) mutual fund, you can deduct up to ₹1.5 lakh per financial year under Section 80C.
But there's a condition: Section 80C deductions are only available under the old tax regime. If you're on the new tax regime (the default from FY 2023-24), you cannot claim this deduction.
What this means in practice: if your annual SIP into ELSS is ₹1.5 lakh, that's ₹1.5 lakh of taxable income you're sheltering — worth ₹15,000– ₹45,000 in actual tax saved depending on your slab. That's a real number worth factoring into your regime choice before March 31.
Not sure which regime saves you more? Use our New vs Old Tax Regime Calculator →
How Long Should You Stay Invested?
The compounding curve isn't linear — it curves sharply upward in later years. The same ₹5,000/month invested for 5 years gives you ₹4.1 lakh. Invested for 10 years: ₹11.6 lakh. Invested for 15 years: ₹25.2 lakh.
The last 5 years of a 15-year SIP generate more money than the first 10 years combined. Starting matters far more than the amount.
SIP vs Lump Sum — Which Is Better for You?
| SIP | Lump Sum | |
|---|---|---|
| Best for | Regular income earners | One-time windfall (bonus, sale) |
| Market timing risk | Low (rupee cost averaging) | High (single entry point) |
| Discipline required | High (monthly commitment) | Low |
| Minimum amount | ₹500/month (most funds) | ₹1,000 (most funds) |
| Tax harvesting | Easier — each instalment has its own purchase date | Simpler to track |
If you have a business bonus or a lump sum sitting in a savings account earning 3.5%, a lump sum investment in a debt fund or index fund often outperforms leaving it idle — while a SIP keeps your monthly surplus working.