What Is XIRR in Mutual Funds? How to Measure Your Real SIP Returns
Your fund app shows 18% returns — but your XIRR might tell a very different story about what you actually earned.
You have been investing ₹5,000 every month via SIP for three years. Your fund shows a 1-year return of 22%. Your total investment is ₹1.80 lakh and your current value is ₹2.10 lakh. What is your actual return? None of these numbers alone answers that question accurately. The correct metric for irregular cash flows like SIPs is XIRR — Extended Internal Rate of Return.
What Is XIRR and Why Does It Matter?
XIRR calculates the annualised return for a series of cash flows occurring at irregular intervals. For a SIP investor:
- Each monthly instalment is a cash outflow (negative)
- The current portfolio value is a cash inflow (positive) at the end
- XIRR finds the single annual interest rate that makes the net present value of all these cash flows equal to zero
This is why XIRR is more meaningful than point-to-point returns: each rupee you invested worked for a different duration. Your first ₹5,000 invested 36 months ago compounded for 3 years; your last instalment invested this month has barely started.
XIRR vs CAGR: What Is the Difference?
| Metric | Best for | Limitation |
|---|---|---|
| Absolute return | Single lump sum, short period | Ignores time |
| CAGR | Single lump sum investment | Wrong for multiple cash flows |
| XIRR | SIPs, irregular investments | Requires all transaction dates |
Example: If you invested ₹1 lakh as a lump sum and it grew to ₹1.44 lakh in 3 years, CAGR = 13%. But if you invested ₹5,000/month for 36 months (total ₹1.80 lakh) and the value is ₹2.10 lakh, CAGR gives a misleading number. XIRR correctly accounts for when each instalment was deployed.
How to Calculate XIRR in Excel or Google Sheets
XIRR takes two inputs: a list of cash flows and the corresponding dates.
Step 1: List all your SIP instalments as NEGATIVE values (outflows)
Step 2: Add current portfolio value as POSITIVE (inflow) on today's date
Step 3: Use: =XIRR(values, dates, [guess])
Example setup (36-month SIP of ₹5,000/month):
A1: -5000 B1: 01-06-2023
A2: -5000 B2: 01-07-2023
...
A36: -5000 B36: 01-05-2026
A37: +210000 B37: 22-06-2026 ← current value
Formula in A38: =XIRR(A1:A37, B1:B37)
Result: ~12.4% p.a.
The optional [guess] parameter (typically 0.1 for 10%) helps Excel converge faster but is usually not needed.
What Is a Good XIRR for Indian Mutual Funds?
Context matters, but here are general benchmarks for equity funds over a full market cycle:
| XIRR range | Interpretation |
|---|---|
| Below 8% | Underperforming even fixed deposits |
| 8–12% | Acceptable; near long-term Nifty average |
| 12–15% | Good for a large-cap or balanced fund |
| 15–18% | Excellent; typical of well-run mid-cap funds over cycles |
| Above 18% | Outstanding; verify if it includes a bull-market-only period |
One caution: XIRR calculated during a market peak will look spectacular and then normalise. Always compare your XIRR to the fund's benchmark XIRR over the same period to judge whether the fund manager added value.
Common XIRR Mistakes to Avoid
Forgetting redemptions: If you withdrew money at any point, include those as positive cash flows on the redemption date. Missing redemptions overstates your XIRR.
Using fund return instead of portfolio return: Fund return shown on apps is the scheme's performance, not your personal return. Your entry timing, top-ups, and withdrawals change your actual XIRR.
Comparing across different periods: An XIRR of 18% over 6 months is not better than 15% over 10 years. XIRR is annualised — but short-period XIRR is extremely sensitive to end-date volatility.
Ignoring exit load and taxes: XIRR on the gross redemption value before exit load and LTCG/STCG taxes will overstate net returns. For a full picture, compute XIRR on post-tax, post-exit-load amounts.
XIRR After Tax: What You Actually Keep
For equity funds held over 1 year (FY 2025-26):
- LTCG above ₹1.25 lakh: taxed at 12.5% without indexation
- STCG (under 1 year): taxed at 20%
Example: XIRR calculation on ₹5,000/month SIP for 5 years
Invested total: ₹3,00,000
Corpus at redemption: ₹5,20,000
Gross gain: ₹2,20,000
Taxable LTCG (above ₹1.25 lakh exemption): ₹95,000
Tax at 12.5%: ₹11,875
Post-tax corpus: ₹5,08,125
Re-run XIRR with post-tax final value for true net return
Use our Income Tax Calculator to estimate your LTCG tax liability before planning a redemption.
These figures are estimates for educational purposes. Consult a SEBI-registered advisor for personalised advice.
Frequently asked questions
Why does my XIRR differ from the return shown on my fund app?+
Fund apps typically show the scheme's point-to-point or rolling return — how the NAV has changed. Your personal XIRR reflects your specific entry dates, amounts, and any withdrawals. If you started a SIP right before a market fall, your XIRR will be lower than the scheme return shown.
Can XIRR be negative?+
Yes. If your portfolio value is currently less than the sum of your investments (net of any withdrawals), XIRR will be negative. This means you have lost money on an annualised basis. This can happen if you invested heavily near a market peak.
Is XIRR the same as IRR?+
IRR assumes equal time intervals between cash flows (e.g., monthly). XIRR handles unequal intervals by using actual dates. For a perfectly regular SIP with no missed months, they give nearly identical results.
My XIRR formula in Excel shows an error — what should I do?+
Common causes: (1) No positive cash flow in the list — ensure current portfolio value is included as positive. (2) All flows are the same sign. (3) Try adding a guess value like 0.10. (4) Ensure dates are formatted as actual dates, not text strings.
Should I compare XIRR to FD returns?+
Yes, but compare after tax. FD interest is taxed at your slab rate (up to 30%), while equity mutual fund LTCG above ₹1.25 lakh is taxed at 12.5%. Adjust both for taxes before comparing to make a fair decision.
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Keep reading
- What Is CAGR in Investing? The Only Return Metric That Matters for Lump Sums
An investment that "doubled in 5 years" sounds great — CAGR tells you whether it actually was.
- SIP vs Lumpsum: Which Builds More Wealth?
SIP averages your buying price and lumpsum maximizes time in the market — which one builds more wealth depends on what you're actually choosing between.
- What Is a Step-Up SIP? How Annual Increases Supercharge Your Corpus
What if your SIP grew every time your salary did? That is exactly what a step-up SIP does.
Priya is a long-term investing nerd who loves a good spreadsheet. She writes the kind of guides she wishes she’d had when she started saving in her twenties.