CalcKitA Systematic Investment Plan (SIP) invests the same amount every month, and every payment then grows on its own. Because each deposit compounds for a different length of time — the first payment grows for the whole period, the last one barely at all — a SIP needs its own formula rather than the plain compound-interest one. Once you understand the three inputs, the calculation is just arithmetic. Here is the whole thing, step by step.
The SIP returns formula
The standard formula is the future value of a monthly annuity with payments at the start of each month:
FV = P × [((1 + i)^n − 1) / i] × (1 + i)
Three inputs feed it: P is the monthly investment amount; i is the monthly rate, found by dividing the annual return by 12 (and by 100 if you wrote the rate as a percentage); n is the total number of monthly payments. The trailing × (1 + i) gives every payment one extra month of growth, because SIP money is normally invested at the beginning of the month rather than the end.
Worked example: ₹10,000 a month for 10 years at 12%
Take a monthly SIP of ₹10,000, an assumed annual return of 12%, and a 10-year horizon. First convert the rate: i = 12 ÷ 12 ÷ 100 = 0.01 per month. The number of payments is n = 10 × 12 = 120 months.
Now plug into the formula. (1.01)^120 is about 3.3004, so the bracket becomes (3.3004 − 1) ÷ 0.01 = 230.04. Multiply by the monthly amount: ₹10,000 × 230.04 = ₹2,300,400. Then apply the start-of-month factor: ₹2,300,400 × 1.01 = about ₹23.2 lakh. That is the projected future value.
To see how the monthly math actually moves, watch the first three months: month 1, your ₹10,000 grows to ₹10,100. Month 2, you add another ₹10,000 (₹20,100) and it grows to ₹20,301. Month 3, the balance becomes ₹30,301 and grows to ₹30,604.01. Repeat that 120 times and compounding does the heavy lifting — which is exactly what our free SIP Calculator does instantly.
Invested amount vs gains: reading your result
The ₹23.2 lakh figure mixes two very different things — your own money and the growth. Split them: your total invested amount is simply monthly SIP × months = ₹10,000 × 120 = ₹12 lakh. Subtract that from the future value: ₹23.2 lakh − ₹12 lakh = about ₹11.2 lakh in gains. Nearly half of the final corpus comes from compounding, not from your pocket. When a calculator shows "projected value," always look at this split — the gains number is where the real story is.
A second example: time beats amount
Here is why starting early matters so much. Invest half the amount — ₹5,000 a month — but for 20 years at an assumed 10% return. That is n = 240 months and i = 0.10 ÷ 12 ≈ 0.00833. Run the formula and you get a future value of about ₹38.3 lakh, from a total investment of ₹12 lakh — meaning roughly ₹26.3 lakh in gains. Compared with the first example, you put in the same ₹12 lakh total but end up with about ₹15 lakh more, purely because the money had ten extra years to compound. Duration is the most powerful variable in the formula.
What the formula leaves out
Three things the arithmetic cannot know. First, the return is not fixed: the formula assumes a steady 12% or 10% every single month, but real market returns bounce around. Use a conservative assumed rate so the projection is a planning estimate, not a promise. Second, it ignores costs and taxes — fund expense ratios nibble at returns and gains may be taxed, so check current rates and rules for your situation. Third, the formula assumes a flat monthly amount; if you raise your SIP every year (a step-up), the standard formula does not cover it and you need a calculator that handles growing contributions.
Try your own numbers
The fastest way to build intuition is to move the inputs around. In our SIP Calculator, try doubling the monthly amount, then try doubling the time instead — you will quickly see which move creates more wealth. A good rule of thumb: when in doubt about the return, run the numbers at both a conservative rate and an optimistic one and treat the gap between them as your uncertainty band. Plan around the conservative figure and let anything extra be a bonus.