Put ₹10,000 a month into a SIP for 10 years at an expected 12% annual return, and the total you've actually paid in is exactly ₹12,00,000 — ten years of ₹10,000, nothing more. The number a SIP calculator shows you is over ₹23,00,000. The gap between those two numbers is the entire point of investing early rather than saving in a lump sum later, and it's worth understanding exactly where it comes from rather than just trusting the output.
The formula
Our SIP Calculator uses the standard SIP future-value formula:
Maturity Value = P × [ ((1 + i)n − 1) / i ] × (1 + i)
where P is your monthly investment, i is the monthly rate of return (annual rate ÷ 12 ÷ 100), and n is the total number of months. It's compound interest applied separately to each month's contribution — the first month's ₹10,000 compounds for close to the full 10 years, the last month's ₹10,000 barely compounds at all, and the formula sums all of that up in one calculation instead of computing each month individually.
Worked example: ₹10,000/month, 12% expected return, 10 years
- Months (n): 10 × 12 = 120
- Monthly rate (i): 12 ÷ 12 ÷ 100 = 0.01 (1% per month)
- Total invested: ₹10,000 × 120 = ₹12,00,000
- Maturity value: ₹23,23,390.76
- Estimated returns: ₹11,23,390.76
The returns are actually slightly larger than the amount you invested — over a 10-year horizon at a realistic equity mutual fund return assumption, compounding does more work than the contributions themselves.
Why the "start of month" assumption matters
The trailing (1 + i) term in the formula reflects a specific, standard assumption: that each month's SIP installment is invested at the start of that month, not the end (this is why it's sometimes called an "annuity due" calculation, versus an "ordinary annuity" that assumes end-of-month investment). It's a small difference per month, but it's the real, correct convention SIP calculators use — worth knowing if you ever compare numbers between two different tools and see a slight mismatch.
The one assumption that actually matters more than the formula
The formula is exact. The expected annual return you type in is not — it's an assumption, and real mutual fund returns vary year to year rather than compounding at one steady rate. A calculator's maturity value is only as reliable as that input; treat the output as a realistic estimate for planning, not a promised number.
Using the tool
Enter your monthly investment, expected annual return, and duration in years, and get the maturity value, total invested amount, and estimated returns broken out separately. Try it here: SIP Calculator.