[ brackt · article ]

Why your SIP calculator is lying to you

11 min read

A ₹10,000-a-month SIP, 20 years, 12% return. That’s the scenario every Indian SIP calculator runs by default.

Three calculators, three different numbers:

  • Some calculators print ₹99,91,479 (Zerodha’s step-up SIP formula, for one, uses the simple-division monthly rate)
  • Groww, brackt, and most others using the geometric monthly rate print ₹91,98,574
  • The amount your future self can actually spend, in today’s purchasing power, after tax, is ₹26,07,901

None of these calculators is being deceptive. They’re applying defensible simplifications. But the cumulative effect of those simplifications is a number that bears very little resemblance to the future you’re actually saving for.

The fantasy is ~3.8× the truth. That gap is the entire reason brackt’s SIP calculator exists.

The three lies, in increasing order of magnitude

There’s no single “right” SIP number. There are a series of choices the calculator makes on your behalf — what compounding convention to use, what to do about inflation, what to do about tax — and each choice nudges the printed figure away from the version of the future you’ll actually experience.

For most calculators, all three choices nudge in the same direction. Up.

Lie 1: Wrong compounding

Some Indian SIP calculators use a simple-division monthly rate. They take your annual return — say, 12% — and divide by 12 to get 1% per month. Then they plug that into the annuity-due formula.

This isn’t strictly wrong. It’s strictly different.

If you compound 1% monthly for 12 months, you don’t end up at 12%. You end up at (1.01)^12 − 1 = 12.68%. So when a calculator uses 1% per month, it’s silently modeling 12.68% effective annual return — not the 12% you typed.

The geometric convention — i = (1.12)^(1/12) − 1 = 0.9489% — is what produces exactly 12% per year when compounded. It’s the convention Groww uses. It’s the convention brackt uses. It’s the convention that matches what the input form says.

For ₹10,000-a-month over 20 years:

  • Simple-division convention (12.68% effective): ₹99,91,479
  • Geometric convention (12% effective): ₹91,98,574
  • Gap: ₹7,92,905 — about 8.6% of the corpus

That ₹8 lakh isn’t a market move. It’s a formula choice. The full mechanics are in how a SIP actually works — for here, it’s enough to know that the bigger number on some calculators is a quiet overstatement, not a different forecast.

This is the smallest of the three lies. The other two are larger.

Lie 2: No inflation

This is the one no SIP calculator on the Indian web addresses by default, and the one with the largest distortion.

₹91.98 lakh in 2046 is not ₹91.98 lakh in 2025. The two numbers share a unit but not a meaning.

Indian CPI inflation has averaged roughly 6% per year over the long run. The RBI’s medium-term target is 4% (with a ±2% tolerance band), and recent quarters have run between 4% and 7%. 6% is the conservative long-run planning assumption — most household budgets in India experience higher than headline CPI because rent, education, and private healthcare all inflate faster than the basket.

At 6% inflation over 20 years, ₹1 today is worth 1 / (1.06)^20 = ₹0.3118 of 2046 rupees. Or, put the other way: ₹91.98 lakh in 2046 is worth 91.98L × 0.3118 = ₹28.68 lakh in today’s purchasing power.

That ₹92 lakh you’re saving for? It buys what ₹28.68 lakh buys today. Not what the offer-letter-like figure on your screen makes you feel like it buys.

This isn’t a small adjustment. It’s a 69% reduction in the meaningful size of the corpus. And it’s the single largest reason long-horizon savers feel that “compounding doesn’t quite work the way the books said” — the books were right, but they were quoting future nominal rupees as if they were today’s rupees.

See the inflation-adjusted version of the same SIP in the calculator with inflation enabled. The headline corpus stays at ₹91.98 lakh. The “today’s money” line underneath reads ₹28.68 lakh. The chart doesn’t change, but the interpretation of the chart does.

Lie 3: No tax

This one is more nuanced than inflation, because it depends on what fund type you’re invested in and what your marginal slab is. But the structural fact stands: almost no Indian SIP calculator computes after-tax corpus on equity, and the ones that do generally don’t model FIFO lot accounting correctly.

The mechanics, briefly. (A full walkthrough is in mutual fund taxation.)

When you redeem an equity SIP, each monthly installment is a separate tax lot with its own purchase date. Lots are sorted FIFO at redemption. Equity lots held ≥12 months are LTCG at 12.5% above the ₹1.25L per-FY exemption (Section 112A). Lots held under 12 months are STCG at 20% (Section 111A). A SIP that’s been running for 20 years and is redeemed at month 240 produces 229 LTCG lots and 11 STCG lots, all with different gain amounts.

For our ₹10,000-a-month × 12% × 20-year scenario:

  • Total invested: ₹24,00,000
  • Gross corpus: ₹91,98,574
  • Total gains: ₹67,98,574
  • LTCG gains (lots ≥12 months): ₹67,92,109
  • LTCG exemption: ₹1,25,000
  • LTCG taxable: ₹66,67,109
  • LTCG tax at 12.5%: ₹8,33,389
  • STCG gains (last 12 installments): ₹6,465
  • STCG tax at 20%: ₹1,293
  • Total tax: ₹8,34,682
  • After-tax corpus: ₹83,63,892

The LTCG haircut is roughly ₹8.3 lakh on this SIP. That’s a 9% chunk off the headline figure, and it’s a real-world cost that lands in the same financial year as the redemption. Most SIP calculators show ₹91.98L (or ₹99.9L) and stop. brackt shows ₹83.64L when you toggle tax on.

See it for yourself in the calculator with tax enabled — the FIFO breakdown is the same logic the engine applies live.

For debt funds (post Section 50AA), this gets worse. All gains are taxed at slab, regardless of holding period — no LTCG benefit, no indexation. A debt SIP at 7% return for someone in the 30% slab loses roughly 30% of the gains to tax. Most debt-fund SIP projections quoted in the press skip this entirely.

Combining all three

The cumulative effect of correcting all three lies is dramatic.

Start with what a simple-division calculator prints for our ₹10,000-a-month × 12% × 20y scenario: ₹99,91,479.

Apply the geometric monthly rate (12% means 12%): ₹91,98,574.

Apply tax (equity LTCG at 12.5% above ₹1.25L exemption): ₹83,63,892.

Apply inflation (6% over 20 years discounts to today’s rupees): ₹26,07,901.

The headline fantasy is ~3.83× the meaningful truth. Most of the gap is inflation. Some is tax. Some is compounding convention. None of it is invisible — every step has a formula behind it. But the cumulative reframing tends to come as a surprise even to investors who’ve been SIPping for years.

You can run all four states yourself: the bare calculator shows ₹91.98L; toggle on inflation and the today’s-money line reads ₹28.68L; toggle on tax and after-tax reads ₹83.64L; toggle both and you land at ₹26.07L — what your ₹24L of SIP is really worth, in today’s money, after the LTCG bite.

Why brackt makes the truth opt-in, not default

A reasonable response to all of the above is: “fine, show the smaller number by default.” Why does brackt still print ₹91.98 lakh as the headline?

Because most people who land on a SIP calculator are doing a back-of-envelope projection, and they came expecting the number they’ve seen on every other calculator. Replacing it with a much smaller after-tax-after-inflation figure without warning would be honest but unhelpful — it would feel like the calculator is broken, when in fact every other calculator is the one selling you something.

The opt-in toggles are a compromise. Default to the standard projection. Make the truth one click away. The engaged reader — the one who actually wants to plan, not just play with sliders — finds it. The casual reader gets a familiar number.

This is also, frankly, what works for a competitor in a crowded category. The most aggressive version of brackt would print the inflation-adjusted-after-tax number first. The pragmatic version prints the standard number first and trusts the reader to dig.

The trust is the entire pitch. A SIP calculator that quietly inflates returns or skips inflation isn’t trustworthy — it’s not lying maliciously, it’s just optimizing for engagement over accuracy. A SIP calculator that puts the geometric formula, the inflation toggle, and the FIFO tax breakdown one click apart is signalling something specific: that it expects you to make a real decision with the output, and it doesn’t want to round in the wrong direction when you do.

What this changes about how you plan

If your retirement number is ₹2 crore in 2046 rupees, you’re planning to retire on what feels like ~₹62 lakh in today’s purchasing power.

If your retirement number is ₹2 crore in today’s purchasing power, you need to save toward a nominal corpus of ~₹6.41 crore (₹2Cr × 1.06^20). At ₹10,000-a-month SIP with 12% return, you won’t get there. At ₹50,000-a-month, you probably will.

This is the single most useful reframing the calculator makes available. The goal mode supports both target types — nominal (the rupees-in-2046 framing) or real-after-tax (the today’s-money framing) — and the binary search backs out the SIP amount required for each. Most users default to nominal because that’s the universe they’ve been planning in. The real-after-tax target is the one that’s actually useful for decisions.

Try the goal calculator in real-after-tax mode with ₹2 crore as the target. The required monthly SIP isn’t ₹21,743 — it’s ₹76,815. That’s how much you’d actually need to invest to have ₹2 crore of today’s purchasing power, after tax, in 20 years.

That’s a 3.5× difference. It’s also closer to the truth of what retirement actually costs.

So what

If you take three things from this article:

  1. The headline number on every Indian SIP calculator is a nominal projection in future rupees, before tax. It’s not wrong — it’s just answering a question you probably weren’t asking. The question you were asking was “how much will this buy me, after the tax man and inflation have taken their share.”

  2. The gap between the nominal and the real-after-tax number is large. For long-horizon SIPs, it’s usually 2.5×–4×. Planning against the nominal number means systematically under-saving.

  3. brackt’s SIP calculator has the standard number by default and the real number one toggle away. The bet is that the engaged user finds the toggle, and the casual user gets a familiar projection. Both better than a calculator that only does one.

The marketing version of compounding says ₹10,000 a month for 20 years becomes a crore. The honest version says ₹10,000 a month for 20 years becomes ₹26 lakh of today’s purchasing power. Both are true. Only one is useful.

Frequently asked questions

Are SIP calculators deliberately misleading?

Mostly no. The simple-division monthly rate is a defensible simplification that produces a slightly inflated number. Skipping inflation is the inherited convention of the entire personal finance category — bank FD calculators, EMI calculators, none of them inflation-adjust. Skipping tax is a real omission but explainable: it depends on slab and fund type. The cumulative effect is misleading even when each individual choice is innocent.

Why 6% inflation? Isn’t actual CPI lower?

Headline CPI in India has averaged 5%–6% over the last decade. The RBI targets 4%. But the basket that working professionals actually spend on — urban rent, private healthcare, education, services — typically inflates faster than headline CPI. 6% is the long-run planning number most financial planners use for retirement projections. brackt’s calculator lets you change it; default 6%.

Doesn’t the calculator’s inflation toggle just multiply by a number? Why is that a “feature”?

Because nobody else does it. Every other SIP calculator on the Indian web shows nominal corpus and leaves the inflation translation as an exercise for the reader — which most readers never complete. The “feature” is that brackt does the multiplication for you and prints both numbers side by side.

Should I always use the after-tax number for planning?

For long-horizon planning, yes. The LTCG you’ll pay on redemption is real money that doesn’t reach your bank account. For SIPs you might redeem in segments across multiple FYs to use the ₹1.25L exemption each year, the after-tax bite can be smaller than what the calculator shows (the v1 engine assumes single-FY redemption). That’s discussed in mutual fund taxation.

What about ELSS and the 80C deduction — doesn’t that change the math?

For taxpayers in the old regime, yes — ELSS contributions up to ₹1.5L per FY reduce taxable income under Section 80C, which can save ₹46,800/year at the 30% slab. The new regime disallows this. For new-regime taxpayers, ELSS becomes “equity mutual fund with a 3-year lock-in” — strictly inferior to a flexible equity fund. Full walkthrough in ELSS vs PPF vs new regime.

Will my actual returns match the calculator’s projection?

Almost certainly not. The 12% number is a long-run average; actual market returns over any given 20-year window could land in a roughly 9%–15% band. That’s why the calculator shows three scenarios (conservative / expected / optimistic) — to communicate the range honestly. A single point estimate is a planning tool, not a forecast.