How a SIP is calculated
A systematic investment plan contributes a fixed sum every month. Each contribution compounds for however long it stays invested, so the first month's money works far harder than the last month's.
This calculator treats contributions as made at the start of each month (an annuity-due), which is how fund houses normally quote SIP returns. The formula is M × (((1+i)ⁿ − 1) ÷ i) × (1+i), where i is the monthly rate and n the number of months.
What a step-up does
A step-up SIP raises your monthly contribution by a set percentage each year, usually tracking salary growth. Because the increases themselves compound, a 10% annual step-up over twenty years produces a dramatically larger corpus than a fixed SIP — often more than double.
The step-up is applied once every twelve months, after the twelfth contribution of each year.
Treat the return rate as an assumption
Market returns are not fixed. A projection at 12% is a scenario, not a promise — real returns arrive unevenly, and a bad sequence early in the term hurts more than the same bad years later.
Run the numbers at a pessimistic rate as well as an optimistic one. If the plan only works at the optimistic figure, it is not yet a plan.
Frequently asked questions
What return rate should I assume? +
For diversified equity funds over long periods, 10–12% is a common planning assumption. Debt funds are typically lower. Whatever you choose, also test a scenario several points lower.
Are taxes included? +
No. Capital gains tax on redemption will reduce the amount you actually receive, and the rate depends on your jurisdiction and holding period.