How this instrument works
A Systematic Investment Plan debits a fixed sum from a bank account on a set date each month and buys mutual fund units at that day's price — India's dominant way for a salaried investor to build an equity position without deciding when to commit a lump sum. Monthly SIP amount, ₹ is that fixed debit, Expected annual return, % is the long-run compound rate being tested, and Investment period, years is how long the instalments keep landing without a gap; Maturity value, ₹ is what the whole series is worth the moment the last instalment finishes compounding.
The formula is annuity-due, not the plain annuity most textbooks teach: the trailing ×(1+r) factor in FV = PMT·(((1+r)ᴺ−1) ⁄ r)·(1+r) exists because each instalment is treated as landing at the start of its month rather than the end, matching how AMFI and most Indian fund houses actually price the SIP maturity figures they publish. That one extra factor is not rounding noise — on a ₹5,000 SIP over 15 years at 12%, it is the difference between ₹24,97,901 and the ₹25,22,880 this instrument returns, a gap worth exactly one extra month of compounding across the whole series.
Expected annual return, % is held perfectly flat for every one of the months compounded, while a real equity fund's monthly return swings between double-digit gains and losses and only averages out, if at all, over a full market cycle. The output also excludes the fund's expense ratio, any exit load on units redeemed early, and the capital-gains tax due whenever those units are eventually sold; a step-up SIP that raises the instalment on a fixed schedule needs its own calculation, since this one holds Monthly SIP amount, ₹ constant throughout Investment period, years.
- Enter the fixed amount invested every month into Monthly SIP amount, ₹.
- Set Expected annual return, % to the long-run compound rate you want to test — 12% is the commonly assumed equity figure used by default here.
- Set Investment period, years to how long the instalments keep landing without a break.
- Read Maturity value, ₹ — what the full series compounds to once the last instalment finishes growing.
Worked example — a ₹5,000 SIP over 15 years
Set Monthly SIP amount, ₹ to 5000, Expected annual return, % to 12, and Investment period, years to 15. The monthly rate is r = 12 ⁄ 1200 = 0.01, N = 15 × 12 = 180 months, and (1.01)^180 works out to about 5.9958. Feeding those into FV = PMT·(((1+r)ᴺ−1) ⁄ r)·(1+r) returns Maturity value, ₹ of ₹25,22,879.998 — about ₹25.2 lakh.
Total instalments over the period add up to just ₹9,00,000 (₹5,000 × 180 months), which means roughly ₹16,22,880 of the ₹25.2 lakh maturity value is compounding growth rather than money the investor deposited — the share that grows fastest in the final few years, since every instalment keeps compounding at the same 1% monthly rate for as long as it stays invested.
Questions
Why does the formula multiply by (1+r) at the end?
Because each instalment is treated as landing at the start of its month rather than the end — the same convention AMFI and most Indian fund houses use when they publish a SIP's projected maturity value. Dropping that trailing (1+r) gives the plain end-of-month annuity total instead, which on this ₹5,000, 12%, 15-year example comes out about ₹24,979 lower: one full extra month of compounding across the whole series, not a rounding difference.
What is the difference between this and a step-up SIP?
This instrument keeps Monthly SIP amount, ₹ fixed for every year of Investment period, years, which is a plain SIP. A step-up SIP raises that instalment by a set percentage on a schedule, commonly once a year, so it starts with smaller payments and compounds a larger amount later; that changing schedule needs its own calculation, since this formula assumes one constant instalment throughout.
Is a 12% expected annual return guaranteed?
No. 12% is a commonly used assumption for long-run Indian equity mutual fund returns, not a promised rate — unlike a bank recurring deposit, a SIP into an equity fund has no fixed or guaranteed return, and any single 15-year stretch can land well above or below that number. Lower Expected annual return, % to see how sensitive Maturity value, ₹ is to that assumption before treating either figure as reliable.
How much of the maturity value is money actually invested, versus growth?
Multiply Monthly SIP amount, ₹ by Investment period, years × 12 to get the total invested — ₹9,00,000 in the default ₹5,000-a-month, 15-year example — then subtract that from Maturity value, ₹ to see the growth portion, about ₹16,22,880 here. That split matters because the growth share compounds fastest in the last few years of the term, so stopping a SIP early forfeits far more than just the missed instalments.
Does this maturity value account for fund charges or tax?
No, deliberately. The expense ratio a fund charges every year, any exit load on units redeemed early, and the capital-gains tax due whenever units are eventually sold all reduce what actually reaches a bank account, and none of them are subtracted here. Treat Maturity value, ₹ as the gross, pre-cost result of the stated assumptions, not a figure a redemption statement will match exactly.
Why might my fund's own SIP calculator show a slightly different number?
Most likely a different compounding convention. Some tools use the plain end-of-month annuity formula with no trailing (1+r), a few compound annually instead of monthly, and some round the monthly rate before raising it to a power — each choice shifts the result slightly even when Monthly SIP amount, ₹, Expected annual return, % and Investment period, years are identical. Compare the underlying formula before assuming either figure is wrong.
References
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.