Type ₹25,000 a month, 12% returns, 15 years into any SIP calculator in India. You will get ₹1.26 crore.
That number is not wrong. It is just not yours.
Between the figure on the screen and the money that reaches your bank account sit three deductions that almost no calculator shows you: the fee your fund charges, the tax you pay on redemption, and the purchasing power the rupee loses while you wait. This article walks through all three, with the arithmetic laid out so you can check it.
The starting number
A SIP of ₹25,000 a month for 15 years, at an assumed 12% annual return, compounded monthly with instalments at the start of each month:
- Total invested: ₹45,00,000
- Maturity value: ₹1,26,14,400
- Gain: ₹81,14,400
This is the brochure number. Every deduction below comes out of it.
Deduction 1 — The expense ratio
A mutual fund charges an annual fee called the Total Expense Ratio, or TER. It is not billed to you separately. It is deducted from the fund's assets every day, which means the NAV you see is already reduced by it. You never notice it leaving.
A regular plan of an actively managed equity fund typically charges somewhere between 1.5% and 2.25% a year. Take 1.5%. If the underlying market returns 12%, what compounds in your account is closer to 10.5%.
At 10.5% instead of 12%:
- Maturity value: ₹1,09,45,689
- Cost of the expense ratio: ₹16,68,711
A fee of 1.5% a year removed 16.7 lakh over fifteen years. That is the nature of a percentage fee applied to a compounding balance — the fee compounds too.
An assumption worth stating plainly. There are two ways to read "12%". If you mean the market returns 12% and your fund charges its fee on top, the calculation above is right. If you mean your fund's NAV grows 12% after all fees, then the expense ratio is already inside that number and you should skip this step. We have used the first reading, because that is how most people understand the assumption when they type it in. If you prefer the second, the corpus stays at ₹1.26 crore and the two deductions below still apply.
Deduction 2 — Capital gains tax
You do not owe tax while the SIP runs. You owe it when you redeem.
For equity-oriented mutual funds held longer than twelve months, long-term capital gains are taxed at 12.5% on gains above ₹1.25 lakh in a financial year, under Section 112A. There is no indexation benefit. A health and education cess of 4% applies on top of the tax. These rates took effect on 23 July 2024 and remain unchanged for FY 2026-27.
On the ₹1,09,45,689 corpus:
| Corpus | ₹1,09,45,689 |
| Less: your own contributions | ₹45,00,000 |
| Gain | ₹64,45,689 |
| Less: annual exemption | ₹1,25,000 |
| Taxable gain | ₹63,20,689 |
| Tax at 12.5% | ₹7,90,086 |
| Plus 4% cess | ₹31,604 |
| Total tax | ₹8,21,690 |
| Post-tax corpus | ₹1,01,24,000 |
You still cross a crore. Just barely, and 25 lakh below what the calculator promised.
Two details that change this number
The exemption is annual, not lifetime. The calculation above assumes you redeem everything in one financial year, which uses the ₹1.25 lakh exemption exactly once. If you redeem in tranches across several financial years, you get a fresh ₹1.25 lakh exemption each year. This is the single most effective lever available to you, and it costs nothing but planning.
A SIP is not one investment. Each monthly instalment has its own purchase date, and the twelve-month holding period is checked instalment by instalment. Redemptions follow FIFO — oldest units first. If you redeem the whole corpus on the day your SIP ends, your final twelve instalments have been held for less than a year and their gains are short-term, taxed at 20% rather than 12.5%. Those instalments are small and their gains are modest, so the effect is limited, but it is real, and no standard calculator accounts for it.
Deduction 3 — Inflation
This one takes nothing out of your account. It changes what the account can buy.
At 6% average inflation over fifteen years, prices roughly 2.4 times. Your ₹1,01,24,000, expressed in what it would buy today:
₹42,24,391.
That is not a trick or a pessimistic assumption. It is the same arithmetic that made ₹42 lakh feel like a fortune in 2011 and ordinary now. If you are planning a goal fifteen years out — a house, a child's education, retirement — the number you should be aiming at is the inflated cost of that goal, not today's price tag.
The whole picture
| Stage | Amount | Change |
|---|---|---|
| What the calculator shows | ₹1,26,14,400 | — |
| After 1.5% expense ratio | ₹1,09,45,689 | −₹16,68,711 |
| After 12.5% LTCG tax and cess | ₹1,01,24,000 | −₹8,21,690 |
| In today's purchasing power | ₹42,24,391 | — |
The part that is genuinely good news
Read that table again from the bottom.
You put in ₹45,00,000 of your own money, ₹25,000 at a time, without ever needing to be clever or lucky or early. You ended up with ₹1,01,24,000 you can actually spend. Your money more than doubled after every fee and every rupee of tax.
That is a strong outcome. Nothing above argues against SIPs. The argument is narrower and more useful: set your target against the honest number, not the brochure one. Someone planning for ₹1.26 crore and receiving ₹1.01 crore has a 25 lakh problem they discover on the day they can least afford to discover it.
If you want ₹1 crore of real, post-tax, in-today's-money wealth after fifteen years at these assumptions, you need to invest roughly ₹59,000 a month, not ₹25,000. That is a hard number to look at. It is much easier to look at now than in fifteen years.
Three things you can do about it
Check your expense ratio. Look up your fund's direct plan against the regular plan you are probably holding. The gap is typically around 0.65 percentage points for equity funds, and on this same SIP it is worth about ₹7.9 lakh over fifteen years. Same fund, same manager, same portfolio.
Plan your redemption, not just your investment. Spreading withdrawals across financial years gives you a fresh ₹1.25 lakh exemption each year instead of one.
Set goals in future rupees. Whatever you are saving for, price it at what it will cost when you buy it, not what it costs today.
Run it on your own numbers
The SIP Calculator shows the brochure number and the tax-and-fee-adjusted number side by side, because you should never see one without the other. The Goal Planner works backwards from a target, and the Future Expense Calculator tells you what that target should be.
Assumptions and sources
- SIP compounded monthly, instalments at the beginning of each month. This is the convention used by most Indian calculators and produces a slightly higher figure than end-of-month.
- 12% is an assumed nominal return, treated as the market return with TER charged on top. It is not a forecast or a guarantee.
- 1.5% TER is representative of a regular plan of an actively managed equity fund. Check your own fund's factsheet.
- 6% inflation is a long-run planning assumption, not a prediction.
- Equity LTCG: 12.5% on gains above ₹1.25 lakh per financial year, Section 112A, Finance (No. 2) Act 2024, effective 23 July 2024, unchanged for FY 2026-27. Short-term gains under Section 111A at 20%. Health and education cess 4%. Surcharge, where applicable to your income, is not modelled.
- Direct-vs-regular TER gap of 0.65 percentage points for equity funds.
This article explains arithmetic. It is not investment advice, and it does not recommend any fund or scheme. Your tax position depends on your total income and other gains in the year — consult a qualified professional before acting.