How SIP Returns Are Calculated
A Systematic Investment Plan (SIP) allows you to invest a fixed amount every month in a mutual fund. Returns are calculated using the compound interest formula for regular contributions:
FV = P × [(1 + r)n – 1] / r × (1 + r)
Where: P = monthly SIP amount, r = monthly interest rate (annual ÷ 12), n = total number of months.
Example: If you invest ₹5,000/month at 12% p.a. for 10 years: r = 12/1200 = 0.01, n = 120. Your invested amount = ₹6,00,000. Estimated returns: ~₹5,64,000. Total value ≈ ₹11,64,000.
Frequently Asked Questions
📝 Worked Example
Inputs: Monthly SIP ₹5,000 · Annual Return 12% · Duration 10 years
| Step | Calculation | Result |
|---|---|---|
| Monthly rate (r) | 12% ÷ 12 | 1% = 0.01 |
| Total months (n) | 10 × 12 | 120 months |
| Future Value | ₹5,000 × [(1.01¹²⁰ − 1) / 0.01] × 1.01 | ≈ ₹11,61,695 |
| Total Invested | ₹5,000 × 120 | ₹6,00,000 |
| Estimated Gains | ₹11,61,695 − ₹6,00,000 | ₹5,61,695 |
💡 Increasing SIP by just ₹1,000/month would add ~₹2.3 lakh to the final corpus.
Is SIP return guaranteed?
No. SIP returns depend entirely on the performance of the underlying mutual fund. The rate you enter is an assumed/expected rate for illustration only.
What is a good expected return rate for SIP?
Historically, large-cap equity mutual funds in India have delivered 10–14% CAGR over long periods. Mid/small-cap funds may return more but carry higher risk.
Does this calculator account for inflation?
No, this is a nominal return calculator. To estimate real returns, subtract the inflation rate from your expected annual return.
Last Updated: June 2025 · Reviewed by Wolf Office Tools Editorial Team