What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan (SIP) is a disciplined method of investing in Mutual Funds. It allows you to invest a fixed amount regularly (monthly or quarterly), helping you build wealth over the long term through the power of compounding.
SIPs work on the principle of Rupee Cost Averaging—you buy more units when the market is low and fewer units when the market is high, averaging out your cost of investment.
Who Can Invest in SIP?
Unlike loans, there are no strict eligibility criteria based on income or credit score. Any individual can start a SIP if they meet these basic requirements:
- KYC Compliant: You must have a PAN Card and be KYC verified.
- Bank Account: An active savings account is needed for auto-debit mandates.
- Minimum Age: Anyone above 18 years can invest. Parents can also invest in the name of a minor.
How This SIP Calculator Helps Your Wealth Planning
Investing without a target is like driving without a destination. This calculator helps you visualize long-term growth and understand the impact of inflation on your wealth.
Visualize Growth
See how a ₹5,000 monthly SIP can grow into crores over 20–30 years due to compounding.
Goal Mapping
Reverse-calculate your SIP by entering a target corpus like ₹1 crore for retirement.
Inflation Awareness
Understand the real value of returns — ₹10 lakh today won’t buy the same in 10 years.
Taxation on SIP Returns (Updated 2025)
SIP returns are taxed based on the type of mutual fund (Equity vs Debt) and the holding period. For Equity Mutual Funds (holding > 65% in stocks):
- Short Term (STCG): If sold before 1 year, gains are taxed at 20%.
- Long Term (LTCG): If sold after 1 year, gains above ₹1.25 Lakh/year are taxed at 12.5%.
SIP Calculation Formula
SIP returns are calculated using the Future Value of Annuity Due formula, as investments are made at the beginning of each period.
- FV = Future Value
- P = Monthly Investment Amount
- i = Monthly Rate (Annual Rate ÷ 1200)
- n = Total Number of Months
Key Advantages of SIP Investing
- Rupee Cost Averaging: Automatically buy low and sell high.
- Disciplined Savings: Auto-debit ensures you save first, spend later.
- Flexibility: You can pause, stop, or increase (step-up) your investment amount anytime.
- Power of Compounding: Returns earned on your returns accelerate wealth creation over time.