Power of SIPs: How ₹10,000 Monthly Can Grow into Crores

 If you look at historical data from AMFI (Association of Mutual Funds in India), the most striking takeaway is not just the final amount, but the speed at which wealth grows in the later years. A monthly SIP of ₹10,000 might look modest initially, but as shown in our data table, it has the potential to transform into a massive corpus over 20 to 30 years.

Systematic Investment Plans (SIPs) have become the backbone of long-term wealth creation in India. The attached table, based on AMFI historical records, shows how a consistent monthly investment of ₹10,000 in mutual funds can compound into substantial wealth over time — even reaching ₹12.79 crore over 30 years.

Understanding the Table: The Power of Time

According to the historical records provided in the image:

• The 5-Year Mark: You invest ₹6 Lakhs, and it grows to nearly ₹9.9 Lakhs at a 20% CAGR.

• The 30-Year Leap: Your total investment is ₹36 Lakhs, but the maturity value hits a staggering ₹12.79 Crores at a 19% CAGR.

The reason the 30-year value is so much higher than the 20-year value (even though you only invested ₹12 Lakhs more) is due to Compounding.

CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specific period of time longer than one year. Unlike absolute returns, CAGR smoothens out the "ups and downs" of the market to show you what your investment earned annually as if it grew at a steady rate.

Example based on Mutual Fund Schemes:

1. Large Cap Funds (Conservative Growth): These funds invest in India's top 100 companies (like Reliance or HDFC Bank). Historically, they deliver a CAGR of 12%–14%.

2. Mid & Small Cap Funds (Aggressive Growth): These invest in smaller, fast-growing companies. While volatile, they often aim for a CAGR of 16%–20% over long horizons, similar to the high-end figures seen in your 30-year data point.

3. Hybrid Funds: These mix equity and debt, usually offering a steadier CAGR of 10%–12%.

The Silent Partner: Capital Gains Tax (2026 Rules)

You don’t get to take the entire "Maturity Value" home. The government takes a share in the form of Capital Gains Tax. Since SIPs are usually equity-oriented, here is how they are taxed:

1. STCG (Short-Term Capital Gains)

If you sell your mutual fund units within 1 year of purchase:

• Tax Rate: 20% on the gains.

• Note: In an SIP, every month's installment is treated as a new investment. You must hold each specific installment for 12 months to avoid STCG.

2. LTCG (Long-Term Capital Gains)

If you sell your units after 1 year:

• Exemption: The first ₹1.25 Lakh of total profit in a financial year is tax-free.

• Tax Rate: 12.5% on any profit exceeding ₹1.25 Lakh.

Example: If your 30-year corpus of ₹12.79 Crore has a profit component of ₹12.43 Crore, you would pay 12.5% tax on almost the entire profit when you withdraw it.

This shows the magic of compounding — the longer you stay invested, the more exponential your growth becomes.