SIP returns vs inflation: what your SIP is really worth in today’s money

A SIP calculator shows a big number at the end: ₹50 lakh, ₹1 crore, sometimes more. It feels like wealth, but it is counted in rupees of the future, and those rupees will buy less. Milk, petrol, school fees and rent all keep rising, so the honest question is not “how much will I have?” but “what will it buy?”

This guide explains how SIP returns work, how to find your return after inflation, what tax takes, and how an equity SIP compares with an FD once prices are counted. The calculator beside the guide follows along and switches to each part’s example.

How do SIP returns work?

Each month your SIP buys units of a fund at that day’s price. The fund’s value rises and falls with the companies it owns, and over years the gains compound: gains earn gains. A calculator assumes a steady yearly return to show the shape of it.

Meet Fathima, a pharmacist in Tiruchirappalli. She invests ₹10,000 a month for 20 years and expects 12% a year. Our SIP calculator shows about ₹99.9 lakh: ₹24 lakh of her own money and ₹75.9 lakh of gains. That is the nominal value, the number on her statement in 20 years.

What is an inflation-adjusted return?

Inflation is how fast prices rise. Retail inflation in India was 5.54% in September 2026 (MoSPI, provisional), and the RBI’s target is 4%, with a band of 2% to 6%, kept until March 2031.

Your real return is the growth left after inflation:

Real return = (1 + return) ÷ (1 + inflation) − 1

At a 12% return and 5.5% inflation, that is 1.12 ÷ 1.055 − 1, about 6.2% a year. Subtracting (12 − 5.5 = 6.5%) is a quick guess that slightly overstates it.

Option	Return	After tax	Real return at 5.5% inflation
Equity SIP (expected)	12%	a little less	about 6.2% before tax
Bank FD, 20% tax slab	6.5%	5.2%	about −0.3%
Savings account	3%	2.4%	below zero

An FD feels safe, and it is safe from market falls, but after tax it may not keep up with prices at all.

SIP return after inflation and tax

Now count both for Fathima.

• On paper: ₹99,91,479
• After LTCG tax: about ₹90,58,169 (12.5% on gains above ₹1.25 lakh, as if she sold everything in one year)
• In today’s money: about ₹31,04,497

So her ₹99.9 lakh will buy roughly what ₹31 lakh buys today. That is still far more than the ₹24 lakh she put in over the years, and it is the number to use when you plan for retirement or a child’s education.

The number at the end of a SIP is in future rupees. Divide by inflation before you decide it is enough.

Mutual fund returns are not guaranteed, and past returns don’t promise future ones. The 12% here is an assumption; real returns vary year to year and can be negative.

What if inflation is higher or lower?

Inflation changes the real value a lot over 20 years. The same plan, after tax, in today’s money:

Inflation a year	Worth in today’s money
4%	₹41.3 lakh
5.5%	₹31.0 lakh
7%	₹23.4 lakh

If the fund earns 10% instead of 12%, at 5.5% inflation the plan is worth about ₹24 lakh in today’s money, about what Fathima put in. The return you assume matters as much as the inflation you assume, so test both.

SIP vs FD vs savings once prices are counted

Put the same ₹10,000 a month for 20 years into three places, tax and 5.5% inflation counted:

The FD and savings figures come from our compound interest calculator. Safe options still have a place: an emergency fund, money needed within 3 years, and the safer part of any long-term plan. PPF, at 7.1% tax-free (India Post, October 2026), sits between the two.

SIP returns in the last 10 to 30 years

Indian equity has beaten inflation over long periods, but not in every stretch. NSE Indices’ return profile (checked 18 October 2026) shows the Nifty 50 total return index at about 11.77% a year over 10 years, 6.02% a year over 5 years, 6.72% a year over 3 years and −8.53% over the past year. Over 5 years, that is only a little above inflation; over 10 years, it has been well above. Past returns don’t promise future ones.

Two habits keep a SIP ahead of prices:

• Give it time. Long periods smooth out bad years.
• Raise the SIP each year. A 6% step-up, close to inflation, would grow Fathima’s plan to about ₹46.1 lakh in today’s money after tax. Our step-up SIP guide shows how.

Questions

What is an inflation-adjusted SIP return?

It is your SIP’s growth after removing the rise in prices. Work it out as (1 + return) ÷ (1 + inflation) − 1. At 12% and 5.5% inflation, it is about 6.2% a year.

How do SIP returns work?

Each instalment buys fund units at that day’s price, and the units rise or fall with the market. Over years, gains compound on earlier gains. A SIP’s return is usually measured as XIRR, because each instalment is invested on a different date.

Do SIP returns beat inflation?

Over long periods, diversified equity funds in India have usually beaten inflation, but not every year or every 5-year stretch. The Nifty 50 total return index has earned about 11.77% a year over the last 10 years, against about 6.02% over the last 5 years (NSE Indices, October 2026). Returns are not guaranteed.

What is ₹1 crore worth after 20 years of inflation?

At 5.5% inflation, ₹1 crore in 20 years buys roughly what ₹34 lakh buys today. At 7%, about ₹25.8 lakh. Always set long goals in future rupees.

Is an FD better than a SIP after inflation?

An FD is safer but, after tax, often barely matches inflation: 6.5% taxed at 20% leaves 5.2%, below 5.5% inflation. A SIP aims higher but moves with the market. Use FDs for short-term and emergency money, SIPs for goals 5 years or more away.

What inflation rate should I use in a SIP calculator?

Use 5–6% for general living costs; retail inflation was 5.54% in September 2026. For education or healthcare, use a higher estimate. Try two rates to see the range.