Guide · India · Mutual funds

SIP: nominal vs real CAGR — and where LTCG fits

Apps love a single percentage. Your kitchen-table planning needs three layers: nominal growth, tax on gains (where applicable), and inflation versus your goal’s rupees.

Stress-test assumptions: SIP calculator with tax and inflation controls · FD calculator as a low-volatility contrast (not equivalent risk)

Disclaimer: Tax law changes; equity funds carry capital loss risk. This is educational, not a recommendation to buy or sell securities.

Nominal CAGR answers a narrow question

Compound annual growth on paper tells you how a series of cashflows grew in account rupees. It can still mislead if you mentally treat it as guaranteed spending power.

Real CAGR subtracts inflation (approximately)

“Real” return adjusts for an assumed inflation path so you can compare outcomes to rent, school fees, or retirement spend — categories that rise with the cost of living.

LTCG on equity funds — intuition only

For many equity-oriented mutual funds held beyond specified holding periods, gains may be taxed under rules that have historically included exemptions up to a threshold and a tax rate on the balance. Exact computation depends on holding period, fund classification, and year of sale — verify with current law and your statement, not a blog summary.

Why this trio matters together

A SIP line that ignores tax and inflation can feel “too good to be true” because it is incomplete. Modelling conservative tax and inflation buffers usually produces calmer, more durable plans.