Mutual Funds XIRR SIP return computation

XIRR for SIPs

From WebNotes, a public knowledge base. Last updated 19 May 2026. Reading time ~6 min.

XIRR (Extended Internal Rate of Return) is the standard methodology for computing the annualised return on SIP-based mutual fund investments. Unlike CAGR (Compound Annual Growth Rate), which assumes a single initial cash outflow and a single terminal value, XIRR accounts for the irregular cash-flow pattern of monthly SIP subscriptions, occasional lump-sum top-ups, partial redemptions, and a terminal closing value.

For Indian retail SIP investors who want to understand the true annualised return on their SIP, XIRR is the correct computation. Using simple averages or CAGR on SIP investments produces misleading results.

Why XIRR (not CAGR) for SIPs

CAGR limitations

CAGR assumes:

One outflow at start.
One inflow at end.
Continuous compounding between them.

CAGR = (Final Value / Initial Value)^(1/years) - 1

For lump-sum investments, CAGR works correctly. But SIPs involve many outflows over time, not one initial outflow.

XIRR strengths

XIRR handles:

Multiple cash outflows (every SIP instalment).
Different dates (1st of each month, or whatever SIP date).
Multiple partial redemptions (if any).
Final scheme value at evaluation date.

The math: XIRR is the discount rate at which the net present value (NPV) of all cash flows equals zero.

Worked example

Investor scenario:

Monthly SIP of Rs 10,000 from 1 January 2025 to 1 January 2030 (60 instalments).
Total invested: Rs 6,00,000.
Scheme value on 1 January 2030: Rs 9,00,000.

Naive return calculation:

Profit: Rs 3,00,000.
Profit %: 50% over 5 years.
Crude annualised: 10%.

This 10% is misleading because it doesn’t account for the fact that early SIP instalments had 5 years to grow, while the last SIP instalment had only 1 month.

XIRR computation (using Excel =XIRR(cashflows, dates)):

Each Rs -10,000 outflow on its date (60 entries).
Rs +9,00,000 inflow on 1 January 2030.
XIRR result: approximately 14.5% annualised.

The 14.5% XIRR is the true annualised return: each SIP instalment effectively earned this annual rate.

Excel / Google Sheets implementation

In Excel:

=XIRR(B1:B61, A1:A61)

Where:

Column A: Dates (60 SIP dates + 1 terminal date).
Column B: Cash flows (-10000 for each SIP, +900000 for terminal value).
Result: annualised XIRR.

Most mutual fund platforms (Zerodha Coin , Groww , Kuvera , ET Money ) automatically display XIRR on portfolio dashboards.

XIRR for partial redemptions

If the investor makes partial redemptions during the SIP period:

Partial redemption = positive inflow on that date.
XIRR still works correctly; just include the inflow in the cash-flow series.

XIRR for SWP (post-accumulation)

SWP (Systematic Withdrawal Plan) has the reverse pattern:

Initial lump-sum outflow.
Monthly positive inflows from redemptions.
Final scheme value (positive).

XIRR computes the annualised return correctly:

=XIRR({-1000000, +5000, +5000, ..., +remaining_value}, {date1, date2, ...})

Practical applications

Performance evaluation

Compute XIRR on completed SIPs to assess realised performance.
Compare against benchmark XIRR (e.g., SIP into NIFTY 50 over the same period).

Goal-based planning

Use XIRR projections to estimate SIP needed for a goal corpus.
Example: targeting Rs 1 crore at retirement in 20 years assuming 12% XIRR.

Tax planning

XIRR alone doesn’t compute capital gains tax.
Per SIP tax FIFO , each instalment’s holding period is tracked separately for tax.

CAGR vs XIRR comparison

Scenario	CAGR works?	XIRR works?
Lump-sum investment	Yes	Yes (gives same result)
Monthly SIP	No	Yes
Irregular top-ups	No	Yes
Partial redemptions	No	Yes
SWP	No	Yes

For irregular cash flows, XIRR is required; CAGR gives wrong results.

Common pitfalls

Same-day cash flows

If an inflow and outflow happen on the same date, group them (XIRR can handle multiple entries on the same date, but conceptually they’re a single net cash flow).

Decimal precision

XIRR is sensitive to date precision. Use exact transaction dates from statements, not approximate month-end values.

Initial guess

Excel’s =XIRR() accepts an optional third argument (initial guess for the rate). For most SIP scenarios, the default works.

Sign conventions

Outflows (subscriptions): negative.
Inflows (redemptions, terminal value): positive.

Incorrect signs result in #NUM! errors or wrong rates.

External references

References

AMFI Best Practice Guidelines on return computation.
SEBI master circular on performance disclosure.
CFA Institute resources on time-weighted vs money-weighted returns.

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 19 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.