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What is the core financial planning benefit of registering an annual 10% 'SIP Step-Up' (Top-Up) facility compared to maintaining a flat monthly SIP over a 15-year horizon?

[ A ]It guarantees that the fund manager will never suffer an annual loss.

[ B ]It eliminates all capital gains taxes under Section 198 (the erstwhile Section 112A) upon redemption.

[ C ]It automatically scales monthly savings in tandem with annual salary increments, deploying larger capital in later compounding years and generating 60% to 75% higher terminal corpus.[ CORRECT ]

[ D ]It mandates that the investor must retire from employment within 5 years.

Takeaway

Option C is correct: It automatically scales monthly savings in tandem with annual salary increments, deploying larger capital in later compounding years and generating 60% to 75% higher terminal corpus.

Derivation

A flat SIP keeps the monthly contribution fixed for 15 years, so most of the compounding advantage is concentrated in the earliest, smallest instalments. A 10% annual Step-Up instead raises the contribution every year in line with typical salary growth, meaning progressively larger sums get invested in the later years of the horizon — years where the accumulated base is already large and even a modest percentage increase in contribution translates into a big absolute rupee increase in what's compounding. Because those larger later-year contributions still have a decade or more left to grow, the terminal corpus ends up 60% to 75% higher than a static SIP of the same starting amount, even though the investor's early-year cash outlay was identical in both scenarios.

Why the others fail

A — It guarantees that the fund manager will never suffer an annual loss.

Step-Up SIP accelerates how much capital gets deployed over time; it has no bearing on annual fund performance, which still depends on underlying equity market movements.

B — It eliminates all capital gains taxes under Section 198 (the erstwhile Section 112A) upon redemption.

SIP step-up is purely a contribution-scheduling feature; capital gains tax under Section 198 (the erstwhile Section 112A) still applies to the accumulated units in the normal way upon redemption.

D — It mandates that the investor must retire from employment within 5 years.

Step-up SIP is a savings mechanism tied to income growth, not a retirement mandate — it does not require the investor to stop working within any fixed timeframe.