What is a SIP (Systematic Investment Plan)?
A Systematic Investment Plan (SIP) is a mutual fund SIP investment method that lets you invest a fixed amount monthly. As of April 2026, SIP inflows exceed ₹25,000 crore/month — driven by rupee cost averaging: markets fall means more units, markets rise means fewer, averaging your cost automatically over time.
How Does SIP Work?
You choose a mutual fund, set a fixed monthly amount (minimum ₹500), and pick an auto-debit date. The amount is deducted automatically every month and invested at that day's NAV. Units accumulate month after month. At redemption, you receive the current market value of all your accumulated units.
SIP Formula
The SIP future value formula is based on the Future Value of an Annuity Due — each monthly payment compounds for the remaining tenure.
Worked Example: ₹5,000/month at 12% for 10 Years
| Monthly SIP | ₹5,000 |
| Duration | 10 years (120 months) |
| Total Invested | ₹6,00,000 |
| Est. Returns | ₹5,61,695 |
| Maturity Value | ₹11,61,695 |
Step-up SIP — Accelerate Wealth
A step-up SIP increases your monthly amount by a fixed % each year. Starting at ₹5,000/month with 10% annual step-up gives ₹5,500 in year 2, ₹6,050 in year 3, and so on.
| Starting SIP | Step-up | 10yr Corpus | vs Flat SIP |
|---|---|---|---|
| ₹5,000/mo | None | ₹11.62 L | Baseline |
| ₹5,000/mo | 10%/yr | ₹19.50 L | +68% |
| ₹5,000/mo | 15%/yr | ₹24.30 L | +109% |
| ₹5,000/mo | 25%/yr | ₹38.80 L | +234% |
SIP vs FD vs PPF: Which is Better in 2026?
SIP vs PPF vs FD is one of the most searched investment comparisons in India. Each suits a different risk profile and time horizon — here is a direct side-by-side for FY 2026-27.
| Feature | SIP (Equity) | FD | PPF |
|---|---|---|---|
| Expected Return | 10–14% p.a. | 6.5–7.5% | 7.1% |
| Risk | Market risk | Nil | Nil |
| Lock-in | None (ELSS: 3yr) | Penalty exit | 15 years |
| Tax on Returns | LTCG 12.5% (>₹1.25L) | Slab rate | Tax-free |
| Best for | Wealth creation 5–30yr | Safety & liquidity | Risk-free long term |
SIP Taxation — FY 2026-27
Each SIP instalment is treated as a separate investment with its own purchase date and holding period — this matters significantly at redemption time.
- LTCG (held >1 yr): 12.5% on equity gains above ₹1.25 lakh/year. No indexation.
- STCG (held <1 yr): 20% flat on gains.
- ELSS SIP: 3-year lock-in per instalment; gains are LTCG; 80C deduction up to ₹1.5L/year.
- Debt SIP: All gains at slab rate (since April 2023).
How to Start a SIP in 2026
Starting a SIP in India is fully digital and takes under 10 minutes. Here is the complete step-by-step process for FY 2026-27.
- Complete KYC via Zerodha Coin, Groww, MFCentral, or your bank using Aadhaar + PAN.
- Choose the best SIP fund for your goal — index funds (Nifty 50 / Nifty Next 50) for beginners; flexi-cap or multi-cap for experienced investors. Use AMFI's fund performance data to compare.
- Set SIP amount (min ₹500/month), date (1st–28th), and tenure (perpetual or fixed).
- Link bank account via NACH mandate — future SIPs are fully automatic.
- Review annually — increase SIP with your salary increment.
Frequently Asked Questions
Answers to the most common questions about SIP investing in India, updated for FY 2026-27.