how is sip return calculated

The standard SIP future-value formula is FV = P x [((1 + i)^n - 1) / i] x (1 + i), where P is the monthly installment, i is the monthly rate (annual rate divided by 12, then by 100), and n is the number of months. The calculator applies the same idea one month at a time: add the installment to the running balance, then grow the whole balance by (1 + i). The two are algebraically identical; the month-by-month version simply gives the year-wise table for free.

Here are the first three months for ₹5,000 a month at 12% a year, where i = 1% a month. Month 1: the ₹5,000 installment grows to ₹5,050.00. Month 2: the balance plus a new installment is ₹10,050.00, which grows to ₹10,150.50. Month 3: ₹15,150.50 grows to ₹15,302.01. After three months you have put in ₹15,000 and the estimate is ₹15,302 — small, because compounding needs time. The table below shows each step.

The biggest reason calculators disagree is timing. This one assumes each installment is made at the start of the month, so it earns growth in that same month, giving ₹11,61,695 for the 10-year example. A calculator that assumes installments at the end of the month gets ₹11,50,193 for identical inputs — about 1.0% lower from timing alone. Some calculators also convert the annual rate to a monthly one differently (an effective-rate conversion instead of dividing by 12), which shifts results again.

No formula can reproduce a real SIP statement exactly. Actual results depend on the NAV on each date your installment is processed, on fund costs and on taxes, and are usually reported as XIRR rather than a constant rate. A calculator gives you a transparent estimate from a return you choose — useful for planning, not a forecast of what a specific fund will deliver.