A SIP calculator is just one formula applied month after month, but the assumption you feed into it determines whether the projection is honest or aspirational. Most calculator screens default to 12–15% expected return, which makes the final figure look heroic but doesn't reflect actual fund performance over 20-year windows.
This guide walks through the math, the step-up variant, and what return numbers are reasonable in May 2026.
What changed in 2026
- Nifty 50 20-year CAGR is 11.5% as of May 2026. Most large-cap funds tracked it within 50 bps net of expenses.
- Mid- and small-cap funds are now subject to stricter risk-o-meter and liquidity disclosures — return assumptions on those should be lower, not higher, than large-cap defaults.
- Step-up SIP is now offered by every major AMC — it used to be a feature only Quant and a few others supported. Now standard.
The SIP formula
Future value of a monthly SIP, with monthly compounding, is:
FV = P × ((1 + r)^n − 1) / r × (1 + r)
Where:
P = monthly investment (₹)r = monthly rate of return (annual rate / 12, expressed as decimal — so 12% p.a. = 0.01)n = number of months
Example: ₹10,000/month at 12% p.a. for 20 years (240 months):
- r = 0.01, n = 240
- FV = 10,000 × ((1.01^240 − 1) / 0.01) × 1.01 ≈ ₹99.9 lakh
Total invested: ₹24 lakh. Wealth created: ₹76 lakh. The compounding does most of the work in the last 8 years.
Step-up SIP — the silent winner
A step-up SIP increases the contribution by a fixed % every year (typically 5–15%). The recursion is harder to write in closed form, so most calculators iterate month-by-month internally.
Quick comparison, ₹10,000 starting SIP, 12% return, 25 years:
- Flat SIP: corpus ≈ ₹1.9 crore, total invested ₹30 lakh
- 10% step-up: corpus ≈ ₹3.9 crore, total invested ₹118 lakh
- 5% step-up: corpus ≈ ₹2.7 crore, total invested ₹57 lakh
Step-up wins because most of the corpus is built in the last decade — and a stepped-up SIP is much larger by then.
What return rate to use in 2026
Realistic ranges for India:
- Large-cap / index funds: 10–12% p.a. (Nifty 50 long-run is 11.5%)
- Flexi-cap / multi-cap: 11–13% p.a.
- Mid-cap: 12–14% p.a. (with 30–40% drawdowns expected)
- Small-cap: 13–15% p.a. (with 50%+ drawdowns)
- Hybrid (60/40): 9–10% p.a.
Cap your assumption at 12% for any plan you're going to commit to. If you actually get 14%, you'll be over-funded — that's a happy outcome. If you assumed 14% and got 11%, you'll be underfunded by 30% at retirement.
SIP vs lumpsum — the real answer
If you have a lumpsum today, lumpsum invested immediately beats SIP about two-thirds of the time historically — because markets go up two-thirds of the time. SIP wins in flat or falling markets.
If you have monthly cash flow (salary), SIP is the only sane option. Don't conflate the two questions.
Comparison: corpus at 25 years (₹10k/mo)
| Return assumption |
Flat SIP |
10% step-up SIP |
| 10% p.a. |
₹1.49 cr |
₹3.0 cr |
| 12% p.a. |
₹1.90 cr |
₹3.9 cr |
| 14% p.a. |
₹2.45 cr |
₹5.2 cr |
FAQ
Are SIP returns guaranteed?
No. SIPs invest in market-linked funds. The "return" is whatever the underlying portfolio earns — could be negative in any 1–3 year window.
Should I increase SIP every year?
Yes — even 5% step-up dramatically improves the 25-year corpus. Most AMCs let you set this up automatically.
Can I pause a SIP?
Yes. Most platforms allow pausing for 1–3 months. After that the SIP cancels and you'd need to set up again.
Where to go next
For related guides see Best mutual funds in India 2026, Lump sum vs DCA investing in 2026, and Compound interest explained for 2026.