SIP Calculator
Estimate returns on your mutual fund SIP investments.
Invested Amount
₹6,00,000
Est. Returns
₹5,61,695
Total Value
₹11,61,695
How Systematic Investment Plan (SIP) Compounding Works
A Systematic Investment Plan (SIP) allows you to invest a fixed amount regularly (monthly or quarterly) into mutual fund schemes. Instead of trying to time the stock market with lump sum investments, SIP harnesses the twin powers of Rupee Cost Averaging and Exponential Compounding over long tenures to build significant wealth.
Monthly SIP Compounding Formula
The future value of an SIP is calculated using the annuity formula:
Where M is Maturity Amount, P is Monthly SIP, i is monthly rate (Annual Rate / 12), and n is total number of months.
Why SIP is Best for Retail Investors
- Disciplined Saving: Auto-debit ensures consistent monthly investment habits.
- Rupee Cost Averaging: Buy more units when markets are down, fewer when up.
- Flexibility: Start with as little as ₹500/month and pause or stop anytime.
Frequently Asked Questions (FAQs)
What is a Step-up SIP or Top-up SIP?
A Step-up SIP allows you to automatically increase your monthly SIP contribution by a fixed percentage or amount every year (e.g., increasing by 10% annually in line with salary hikes). This dramatically accelerates wealth creation compared to a static SIP.
How are SIP mutual fund returns taxed in India?
For equity mutual funds (holding >65% domestic equities), capital gains on units held for more than 1 year are treated as Long Term Capital Gains (LTCG) and taxed at 12.5% (with an exemption on the first ₹1.25 lakh of total gains per year). Short Term Capital Gains (STCG) on units held for less than 1 year are taxed at 20%.
What happens if I miss a monthly SIP installment?
If your bank account does not have sufficient balance on the SIP debit date, the mutual fund house will simply skip that month's installment without canceling your investment. However, your bank may charge an ECS/NACH bounce fee for auto-debit failure.
Frequently Asked Questions
What is a SIP (Systematic Investment Plan)?
SIP is a method of investing a fixed amount regularly (e.g., monthly) in mutual funds, allowing you to build wealth over time through the power of compounding.
How are SIP returns calculated?
SIP returns are calculated using the compound interest formula adapted for multiple periodic investments, typically expressed as Compound Annual Growth Rate (CAGR).
Can I stop my SIP anytime?
Yes, most mutual fund SIPs are flexible. You can pause, stop, or increase your SIP amount at any time without paying a penalty.