SIP Calculator

1. Year-by-Year Compounding

SIPs invest monthly, so the maturity value is built up month by month. For each year:

Balance(y) = Balance(y−1) × (1 + r)¹² + MonthlySIP(y) × [((1 + r)¹² − 1) ÷ r] × (1 + r)

Where r is the effective monthly rate, derived from the annual CAGR you entered:

r = (1 + annualReturn)^(1/12) − 1

So 12% CAGR becomes ~0.949% per month. Compounding 0.949% over 12 months gives back exactly 12% — that's what makes CAGR "effective." The second term in the main formula is the future value of an annuity-due (start-of-month investments) compounded over 12 months.

2. Annual Step-up

Your monthly SIP grows by the step-up % each year. So in year y, your monthly amount is:

MonthlySIP(y) = StartingSIP × (1 + step_up)^(y−1)

A 10% step-up over 25 years turns ₹12,000/month into ₹1.18 lakh/month by the final year.

3. Inflation-Adjusted (Real) Value

Money in 25 years won't have the same purchasing power as today. Real value discounts the maturity by inflation:

RealValue = MaturityValue ÷ (1 + inflation)^years

And the real return rate is what you actually earn after inflation:

RealReturn = (1 + nominal) ÷ (1 + inflation) − 1

4. LTCG Tax

For equity mutual funds in India: long-term capital gains above ₹1.25 lakh per year are taxed at 12.5%. The calculator estimates this on the final corpus only — not on year-by-year redemptions:

LTCG = max(0, (Maturity − Invested − ₹1.25L) × 12.5%)

This is a conservative estimate; in practice you'd realise gains gradually and may pay less.

5. Alternative Investment Comparison

The same monthly SIP + step-up applied to other instruments at their typical returns:

• PPF (7.1%): EEE — fully tax-free; 15-year lock-in; ₹1.5L annual cap.
• Bank FD (6.5%): Interest taxed at slab rate.
• EPF (8.25%): EEE up to limits; mandatory for salaried employees.
• Debt Mutual Fund (7.5%): Post-2023 — taxed at slab rate, no indexation.
• Hybrid Fund (10%): 12.5% LTCG above ₹1.25L; balanced equity-debt mix.

6. Status Labels in the Year-by-Year Table

• Early — annual gains are still small relative to invested amount.
• Building — annual gains are 30–100% of cumulative invested.
• Growing — annual gains exceed cumulative invested.
• Compounding — annual gains exceed 2× cumulative invested. Compounding is doing the heavy lifting.

Caveats

All projections are estimates. Real-world returns vary year to year, tax rules change, and inflation isn't constant. Use this as a planning tool, not a guarantee. The default 12% return is a long-term equity MF average; your actual experience may be higher or lower.