Step-up SIP calculator

What a step-up SIP changes

An ordinary SIP holds the instalment still. A step-up SIP, which some fund houses call a top-up SIP, adds a yearly rise to the mandate. The compounding formula underneath is unchanged. What changes is the stream of money going in, so the page cannot use a single closed formula for the whole term the way the SIP calculator does. It runs the term as twelve equal instalments per year, with a new instalment size each year.

That has one practical consequence that a corpus figure hides: the later instalments are much bigger than the first. At a 10 per cent step, ₹10,000 a month in year one becomes ₹23,579 a month in year ten. The bar chart on this page exists to keep that number in front of you, because the corpus only arrives if the higher instalments are actually paid.

The formula this page uses

For each year y from 1 to the end of the term, the instalment is the starting SIP multiplied by one plus the step-up rate, raised to the power y minus 1. Inside each year, every month does the same two things in order: add the instalment, then apply one month of return. The monthly rate is the annual rate divided by 12, the same convention used on the flat SIP page, so the two pages agree when the step-up is set to zero.

In the fixed rupee version, the instalment in year y is the starting SIP plus the step amount multiplied by y minus 1. A rupee step grows in a straight line, while a percentage step keeps compounding. Over a long term the gap between those two becomes large, which is why the page offers both.

Worked example you can check

Take ₹10,000 a month, a 10 per cent annual step-up, an assumed return of 12 per cent and a 10-year term. The monthly rate is 1 per cent. One year of instalments of 1 rupee, paid at the start of each month, grows to 12.8093 rupees by the end of that year. So year one contributes ₹10,000 times 12.8093, or ₹1,28,093, and that sum then compounds for nine more years.

The final corpus is about ₹33,74,326, of which ₹19,12,491 is your own money and ₹14,61,835 is the gain at the assumed rate.

Step-up against flat, on the same inputs

A flat ₹10,000 SIP on the same return and term reaches ₹23,23,391 on an investment of ₹12,00,000. The step-up reaches ₹33,74,326 on an investment of ₹19,12,491. The ₹10,50,935 difference in corpus costs ₹7,12,491 in extra contributions, and the rest is return earned on that extra money.

Read those two figures together. Comparing corpus alone flatters the step-up, because more money went in. A fairer comparison on the page is the note under the tiles: the flat SIP that would reach the same corpus. Here that is about ₹14,523 a month from the first month. So the choice can be framed as a higher flat amount now, or a lower amount now that rises later.

How the step-up rate moves the answer

Holding the start at ₹10,000, the return at 12 per cent and the term at 10 years, changing only the step-up gives the following.

Term matters more than either. Run the 10 per cent step for 20 years instead of 10 and the corpus is about ₹1,98,88,715 on ₹68,73,000 invested, against ₹99,91,479 on ₹24,00,000 for the flat SIP. By year 20 the instalment has reached about ₹61,159 a month, which is a large assumption about future income to build into a plan.

The assumed return still sets the range

The return input is a number you supply, and the corpus is very sensitive to it. With the same ₹10,000 start, 10 per cent step and 10-year term, an assumed 8 per cent gives about ₹27,57,917, 10 per cent gives ₹30,45,852, and 14 per cent gives ₹37,49,776. Mutual fund returns move from year to year, and a real SIP will not earn one steady rate. Treat each figure as arithmetic at that rate, and run more than one rate before reading anything into a single result.

The scheme's own past returns appear in its fact sheet and Scheme Information Document. They describe what has happened and carry no promise about what comes next.

Tax on redemption

A step-up does not change how units are taxed. Each instalment buys its own units with its own holding period, and tax arises when units are redeemed. For an equity-oriented fund, units held for more than 12 months fall under long-term capital gains at 12.5 per cent above the ₹1,25,000 annual exemption, and units held up to 12 months are taxed at 20 per cent. Units of debt funds bought on or after 1 April 2023 are taxed at slab rate, whatever the holding period. Because the later instalments are the largest, more of the money sits in recently bought units near the end of the term, which matters if you plan to redeem all at once. Surcharge, cess and your own position are outside this page, so check them with a qualified chartered accountant.

What this calculator leaves out

• Any exit load the scheme charges on early redemption.
• A pause or skipped instalment. The arithmetic assumes every instalment is paid in full on time.
• A step-up date other than the anniversary of the SIP. Some mandates apply the rise at six months or on a set calendar date.
• Changes in the return from year to year. To model a rate that changes by phase, use the investment calculator.
• Inflation. To restate the final figure in today's money, use the inflation calculator.

Frequently asked questions

Courses that teach the subject behind the step-up SIP calculator