Contents
- What is XIRR?
- Why XIRR matters for mutual fund SIP investors
- The XIRR formula
- A worked example
- XIRR vs CAGR: when to use which
- Common XIRR mistakes
- XIRR for goal-based investors
- Tax rules summary (Budget 2024 — current rates)
- Tools to compute your XIRR
- Frequently asked questions
- What is XIRR in mutual fund returns?
- Is a 15% XIRR good?
- What is the difference between XIRR and CAGR?
- Can XIRR be negative?
- How do I calculate XIRR in Google Sheets?
Published by MintByte Research · Last updated 30 May 2026
If you've ever logged into a mutual fund app and seen a return labelled "XIRR" instead of "CAGR", you've already met one of the most useful but most misunderstood metrics in personal finance. This guide answers what is XIRR in mutual fund terms, walks through a worked example, explains when to use it versus CAGR, and covers the typical pitfalls.
Past performance is not indicative of future returns. This article is informational; it is not investment advice.
What is XIRR?
XIRR (Extended Internal Rate of Return) is an annualised rate of return that handles a series of cash flows occurring on irregular dates. It is the single most accurate way to report the return of an SIP, an STP, an SWP, or any portfolio where you have invested or withdrawn money on more than one date.
In plain English: XIRR tells you "what constant annual rate of return, applied to each individual cash flow on its actual date, would produce the value you actually ended up with."
For a one-shot lumpsum that you simply held until today, XIRR equals CAGR. They diverge only when you have multiple cash flows. See the XIRR glossary entry and the CAGR glossary entry for the formal definitions.
Why XIRR matters for mutual fund SIP investors
Consider a Rs 10,000 SIP for 36 months. Your first instalment has been compounding for 36 months. Your last instalment has been compounding for just 1 month. A simple "total profit / total investment" calculation would massively understate your true annualised return because most of your money was not actually invested for the full 3 years.
CAGR — defined as a single-investment compounded growth rate over a fixed period — can't handle this. XIRR can.
This is why every Indian mutual fund platform — Groww, Kuvera, Zerodha Coin, ET Money, MF Central, INDmoney — shows your SIP returns as XIRR, not as a simple percentage gain.
The XIRR formula
XIRR is the value of r that solves this equation:
0 = Σ [ CF_i / (1 + r)^(d_i / 365) ]where:
CF_iis the i-th cash flow (negative for outflows i.e. investments, positive for inflows i.e. redemptions / current value)d_iis the number of days between cash flowiand a chosen base date (usually the first cash flow)ris the unknown annual rate
The equation has no closed-form solution — it must be solved iteratively. Spreadsheet packages (Excel, Google Sheets) ship the =XIRR(values, dates) function which does this for you. Programming languages typically need a financial library or a Newton-Raphson solver.
A worked example
Suppose you ran a Rs 10,000 monthly SIP for 12 months in a hypothetical equity fund. Your cash flows looked like this:
| Date | Cash flow | Notes |
|---|---|---|
| 01-Jun-2025 | -10,000 | Instalment 1 |
| 01-Jul-2025 | -10,000 | Instalment 2 |
| 01-Aug-2025 | -10,000 | Instalment 3 |
| 01-Sep-2025 | -10,000 | Instalment 4 |
| 01-Oct-2025 | -10,000 | Instalment 5 |
| 01-Nov-2025 | -10,000 | Instalment 6 |
| 01-Dec-2025 | -10,000 | Instalment 7 |
| 01-Jan-2026 | -10,000 | Instalment 8 |
| 01-Feb-2026 | -10,000 | Instalment 9 |
| 01-Mar-2026 | -10,000 | Instalment 10 |
| 01-Apr-2026 | -10,000 | Instalment 11 |
| 01-May-2026 | -10,000 | Instalment 12 |
| 30-May-2026 | +1,32,500 | Current portfolio value |
Total invested: Rs 1,20,000. Current value: Rs 1,32,500. Absolute gain: Rs 12,500 (10.4%).
If you naively reported this as "10.4% in one year", you'd be misleading yourself. Most of that Rs 1,20,000 was not invested for a full year. The first instalment had ~12 months of compounding, the last instalment had just ~1 month.
The correct XIRR for this series, when solved, is approximately 19.0% per annum. That is the true annualised rate.
In Excel: =XIRR(B2:B14, A2:A14) where column B holds the cash flows (negative for investments, positive for current value) and column A holds the dates. Try it — the answer should be ~0.19 or 19%.
You can run this same calculation on your own portfolio using the True XIRR (after fees) Calculator.
XIRR vs CAGR: when to use which
| Situation | Use this metric |
|---|---|
| Lumpsum, single buy, single sell | CAGR (XIRR also works and gives same answer) |
| SIP — regular monthly instalments | XIRR |
| SIP + occasional lumpsum top-ups | XIRR |
| STP — transfer from liquid to equity | XIRR |
| SWP — regular withdrawals during accumulation | XIRR |
| Whole portfolio with deposits and withdrawals | XIRR |
| Reporting a fund's NAV-to-NAV return over 3 years | CAGR |
| Comparing two schemes' long-term performance | CAGR |
A useful rule: if you can summarise the investment with just two numbers and two dates, use CAGR. If you need more than two cash flows, use XIRR.
Common XIRR mistakes
- Sign convention. Investments are negative; redemptions and current value are positive. If you flip the signs, Excel returns a negative or nonsensical number.
- Including only invested cash flows but not the current value. XIRR needs at least one positive cash flow. The current portfolio value (entered on today's date) serves this role for an in-progress SIP.
- Comparing short-window XIRR to long-window CAGR. A 3-month SIP that did 4% in 3 months has a high XIRR (~17% annualised) but that doesn't mean a 17% long-term return — short windows produce noisy XIRR.
- Mixing tax and pre-tax cash flows. Decide upfront whether you want gross or net-of-tax XIRR — the post-tax number is usually 1.5-3% lower.
- Ignoring exit loads and STT. A "True XIRR" should subtract these from the redemption cash flow. Our True XIRR Calculator handles this automatically.
XIRR for goal-based investors
Once you understand XIRR, you can do honest goal tracking:
- Run your historical SIP through
XIRR(cash flows, dates)once a year. - Compare the resulting XIRR to the return assumption you used in your Goal Setting Calculator or Retirement Planning Calculator.
- If realised XIRR is materially lower than assumed return for 3+ years, increase your SIP, extend your horizon, or both.
Tax rules summary (Budget 2024 — current rates)
While XIRR itself is a return metric and not a tax concept, your post-tax XIRR will be lower than your pre-tax XIRR because of capital gains taxes:
| Holding period | Equity-oriented MF |
|---|---|
| < 12 months | 20% STCG (flat) |
| > 12 months | 12.5% LTCG above Rs 1.25 lakh/yr |
| Dividend (any holding) | Slab rate + TDS @ 10% (above Rs 5,000/yr) |
For SIP investors, each instalment has its own holding period clock, so when computing post-tax XIRR on a partially redeemed portfolio, you must classify each unit's redemption as STCG or LTCG based on when that specific instalment was bought.
Tools to compute your XIRR
- In a spreadsheet:
=XIRR(values, dates, [guess]) - MintByte True XIRR Calculator: True XIRR (after fees) — accepts your cash flows and current portfolio value
- MintByte SIP Calculator: SIP Calculator — projects forward XIRR for a hypothetical SIP at an assumed return
- MintByte Lumpsum Return Calculator: Lumpsum Return Calculator — equivalent to CAGR for single-cash-flow investments
Frequently asked questions
What is XIRR in mutual fund returns?
XIRR is the annualised rate of return on a series of cash flows occurring on different dates. For mutual fund SIPs, it is the only mathematically correct way to report the annualised return because each instalment has a different holding period.
Is a 15% XIRR good?
For Indian equity mutual funds over a 5-10 year horizon, 12-15% XIRR has historically been a reasonable bracket for large-cap funds, and 15-20% for mid- and small-cap funds. Past performance is not indicative of future returns, and individual results vary materially across schemes and time periods.
What is the difference between XIRR and CAGR?
CAGR assumes a single investment held for a specific period. XIRR handles multiple cash flows on irregular dates. CAGR is a special case of XIRR with only one inflow and one outflow.
Can XIRR be negative?
Yes. If your current portfolio value is less than the total amount you invested (i.e. you are sitting on a loss), XIRR will be negative — it represents the annualised rate at which you are losing money.
How do I calculate XIRR in Google Sheets?
Use =XIRR(values, dates). Put cash flows in one column (negative for investments, positive for current value or redemptions) and the corresponding dates in another column. Press Enter — the function returns the annualised rate as a decimal (multiply by 100 for percentage).