SIP Calculator

SIP stands for Systematic Investment Plan, a method of investing in mutual funds in which you contribute a fixed amount of money at regular intervals, like monthly or quarterly. It's a way to invest in mutual funds without making a significant lump-sum investment all at once.

What Is SIP Calculator?

A SIP (Systematic Investment Plan) calculator is a financial tool that helps investors estimate the returns on their SIP investments. It allows investors to calculate their monthly investment amount, investment duration, and expected rate of return to calculate the future value of their investment. 

This SIP Calculator by Cleartax particularly helps investors plan their investments and understand how their money can grow.

How Can SIP Calculator Help You?

A SIP calculator is a simple tool that helps you plan your savings by showing how much money you can grow over time. Here's how it helps:

See Future Savings: You put in how much money you want to invest regularly (monthly), the period (3,5,7 years), and an expected growth rate (like 12,15,18 %). The calculator shows how much your money could become.

Plan Better: The SIP Calculator helps you decide how much to save each month to reach your goals, such as buying a car or a house.

Understand Growth: The Calculator shows how your small, regular savings can grow over time because of the compounding growth in mutual funds.

Save Time: Instead of doing complex math, the calculator does it for you instantly.

Try Different Options: You can change the amount, time, or rate to see what works best for your budget.

SIP Calculator Formula

An SIP Investment Calculator uses the following formula for getting the estimated returns:

FV = P × [({(1 + r)^n – 1} / r) × (1 + r)]

Where,

FV = Future Value of the Investment.

P = Monthly Investment Value (Periodic Investment).

r = Expected Rate of Return.

n = Number of years.

How To Use SIP Calculator

SIP Calculator is very simple to use. It is a three-step process. You can use it by following the steps mentioned below.

• Step 1: Enter your Monthly SIP amount
• Step 2: Enter your SIP tenure
• Step 3: Enter the expected Rate of Return

Hence, after entering the details, the Cleartax SIP calculator will automatically show the invested value, estimated returns on the investment, and the total investment value immediately.

Let’s understand how to use the SIP calculator by using some real-time examples. 

SIP Calculation Example 1: 

Abhi from Mumbai wants to invest in a mutual fund through a Systematic Investment Plan (SIP) to save for a down payment on his dream car in 7 years. He decides to use the SIP Calculator to estimate his future savings.

• Step 1: Enter Monthly SIP Amount: Abhi decides to invest ₹8,000 per month.
• Step 2: Enter SIP Tenure: He chooses a tenure of 7 years (84 months).
• Step 3: Enter Expected Rate of Return: Based on his research, he expects an annual return of 14% from an equity mutual fund.

Once he fills in the details automatically, the SIP calculator will give the results

Results From SIP Calculator:

• Invested Amount: ₹6,72,000
• Estimated Returns (Wealth Gained): ₹4,77,600
• Total Future Value: ₹11,49,600

The SIP Calculator instantly shows Abhi that by investing ₹8,000 monthly for 7 years at an expected return of 14%, he could accumulate approximately ₹11.49 lakh. This helps him confirm that her investment plan aligns with his car savings goal. He can also adjust the SIP amount or tenure in the calculator to explore other scenarios, such as increasing his monthly investment to ₹10,000 or extending the tenure to 10 years for a larger corpus.

SIP Calculation Example 2: 

Prachi from Bangalore is aged 50 and wants to save corpus for her retirement via investing in Mutual Fund in SIP, she was an aggressive investor and wants to make aggressive returns and invests in small cap funds now she wants to know how much corpus she can make on her retirement and uses SIP Calculator to know the expected value.

• Step 1: Enter Monthly SIP Amount: Prachi decides to invest ₹15,000 per month.
• Step 2: Enter SIP Tenure: She chooses a tenure of 10 years (120 Months) till her retirement.
• Step 3: Enter Expected Rate of Return: Based on her research and her investing experience, she expects an annual return of 17%.

After giving the inputs automatically the SIP calculator will give the results

Results From SIP Calculator:

• Invested Amount: ₹18,00,000
• Estimated Returns (Wealth Gained): 29,34,526.4
• Total Future Value: ₹47,34,526.46

The SIP Calculator instantly gives the output to Prachi that by investing ₹15,000 monthly for 10 years till her retirement at an expected return of 17%, she could accumulate approximately ₹47.43 lakh, it helps her that her investment of 18 Lakh over 10 years can ideally make big retirement corpus.

Example 3: How much ₹1000 SIP Will Become In 5 years?

Let's assume a college student, Sneha, aged 21, wants to invest ₹1000 in a SIP for 5 years, and she wants to know how much money he can make after 5 years, and uses the SIP calculator and assumes 15% of growth for his investment on a YOY basis.

• Step 1: Enter Monthly SIP Amount: Sneha puts ₹1,000, hence she wants to invest 1k per month.
• Step 2: Enter SIP Tenure: She chooses a tenure of 5 years (60 Months).
• Step 3: Enter Expected Rate of Return: Based on her knowledge, she expects an annual return of 15%.

After giving the inputs automatically, the SIP calculator will give the results

Results From SIP Calculator:

Invested Amount: ₹60,000
Estimated Returns: ₹29,681.69
Total Investment Value: ₹89,681.69

The SIP calculator immediately tells Sneha that her investment of 60,000 over the 5 years became 89,681.69, which is approximately a 50% return on her overall investment.

Example 4: How A ₹5000 SIP Will Grow In 10 years?

Abdul from Hyderabad, having a business, wants to invest in mutual funds of ₹5000 per month via SIP for 10 years. He uses the SIP Calculator to estimate how much wealth he can get after 10 years of investment by expecting a 16% return per annum.

• Step 1: Enter Monthly SIP Amount: Abdul enters ₹5,000.
• Step 2: Enter SIP Tenure: He chooses a tenure of 10 years (120 Months).
• Step 3: Enter Expected Rate of Return: Based on her knowledge, she expects an annual return of 15%.

After entering the three inputs, the SIP calculator will automatically give the results

Results From SIP Calculator:

Invested Amount: ₹22,80,000
Estimated Returns: ₹64,73,254.18
Total Investment Value: ₹87,53,254.18

Abdul was immediately able to see that the investment of ₹6,00,000 had given whopping returns of ₹8,82,357.55. Now, he has a total investment value of 14.82 Lakh.

Example 5: Can I Invest ₹10,000 Per Month Via SIP?

Yes, you can invest 10,000 per month in SIP. Priya from Chennai was investing 10,000 per month in a mutual fund for her child's marriage. She was a moderate risk-taker and invested in hybrid and index funds, expecting a rate of return of 12% per annum. Now she uses the SIP calculator to check how her investments can grow over 20 years.

• Step 1: Enter Monthly SIP Amount: Priya Inputs ₹10,000.
• Step 2: Enter SIP Tenure: She chooses a tenure of 20 years (240 Months).
• Step 3: Enter Expected Rate of Return: she expects an annual return of 12%.

After entering the three inputs, the SIP calculator will automatically give the results

Results From SIP Calculator:

Invested Amount: ₹24,00,000
Estimated Returns: ₹75,91,479.19
Total Investment Value: ₹99,91,479.19

After using the SIP calculator, Priya understood that her investment of 24 Lakh would become 99.91 Lakh with an expected return of 75.91 Lakh over the period.

Advantages Of Using SIP Calculator

SIP calculator offers several advantages for investors planning their mutual fund investments. It provides a clear picture of potential returns and helps in setting realistic financial goals. The tool is user-friendly, making it accessible even for those without extensive financial expertise.

• SIP Calculator eliminates the need for rough estimates and provides the estimated returns based on the inputs.
• Investors can use the SIP Calculator with different investment durations, amounts, and expected returns to see how changes in investments impact their potential corpus.
• Cleartax SIP Calculator streamlines the process of assessing SIP returns, saving more time than manual calculation.
• SIP calculator provides insights into potential returns, and helps investors to make more informed decisions and plan their finances effectively.

Tax Implications On SIP Investment

Returns made from the sale of equity mutual funds fall under capital gains, hence STCG & LTCG will be applicable

Long Term Capital Gains: Units sold after 1 Year of purchase will be taxed at 12.5 % on returns made above 1.25 lakh in a financial year.
Short-term capital Gains: Returns made on the sale of mutual funds within one year from the date of purchase will be taxed at 20%.
Debt Funds Taxation:

• If purchased before 1 April 2023 and help up to 24 months consider as STCG and taxed at slab rate, otherwise held for more than 24 months consider as LTCG and tax at rate 12.5% without indexation.
• If purchased on or after 1 April 2023, consider always STCG under section 50AA and taxed at the slab rate.

Dividend Tax: Income from dividends by mutual funds is taxable under slab rates.

How To Invest In Mutual Funds Via SIP

Investing in mutual funds is a very simple process at Cleartax. Follow the steps below to invest in mutual funds via SIP.

• Step 1: Open Cleartax Invest on your browser.
• Step 2: Log in / Create Your Account with cleartax
• Step 3: Select the Mutual Fund that you are interested to invest.
• Step 4: Select the SIP option in the fund page
• Step 5: Enter the SIP amount
• Step 6: Click on Invest Now
• Step 7: Complete the payment with a registered Bank
• Step 8: Set up the Auto-Pay

Once you successfully complete Auto-pay, your SIP process is completed every month. Your SIP will trigger automatically, so make sure to keep sufficient funds in your account.