Internal Rate of Return (IRR) is the discount rate that makes the net present value of a series of cash flows zero. It's the standard way to evaluate any investment that has multiple cash flows over time - projects, real estate, private equity, or a series of mutual fund redemptions.
Year 0 is the initial investment (negative). Subsequent years are net cash flows (usually positive).
IRR
13.45%
Annualised return
Total inflows
₹15,00,000
Initial outlay
₹10,00,000
Quick interpretation
Net cash sum (un-discounted): ₹5,00,000 · Project returns more than invested.
IRR exceeds equity benchmark (12%) - strong project.
For irregular dates, use XIRR (cash flows on actual calendar dates). For multiple sign changes in cash flow, IRR may have more than one mathematically valid solution; this tool returns the closest to a 10% starting guess.
Une partie du contenu est encore affichée en anglais.
Internal Rate of Return (IRR) is the gold-standard metric for evaluating any investment with multiple cash flows over time. Where simple ROI and CAGR work for single buy/single sell investments, IRR handles the complex real-world cases: real-estate projects with phased construction payments and rental income, private equity with multiple capital calls and distributions, business projects with staggered investments and uneven returns, even a simple SIP+lump-sum mutual fund position. The IRR is the single annualised rate that, if used as the discount rate, would make the net present value of the entire cash-flow stream exactly zero.
For Indian investors evaluating real-estate development projects, AIF investments, venture capital, REIT distributions, or business capital projects, IRR is the right metric. It's also how mutual funds report XIRR (the extension of IRR for irregular dates) on consolidated investment statements. This calculator implements the standard Newton-Raphson numerical solution that Excel's IRR() function uses - same answer, accurate to 0.01%.
Enter your initial outflow as a negative number (Year 0 = −X).
Enter the cash inflows for each year as positive numbers.
If a year has both inflow and outflow, net them.
The calculator solves for the rate where the NPV is zero.
IRR is found numerically - there's no closed-form solution. The calculator uses Newton-Raphson, starting from a 10% guess and iterating until the NPV is essentially zero. The result is the annualised return that the cash-flow series implicitly delivers.
0 = Σ CFₜ / (1 + IRR)^t → solve for IRR
The IRR equation has no closed-form solution. The calculator uses Newton-Raphson iteration: start with a 10% guess, compute the resulting NPV, take the derivative, and adjust the guess in the direction that brings NPV closer to zero. Repeat until the NPV is essentially zero (typically within 5-10 iterations). The output is the constant discount rate that makes the cash-flow series' present value exactly zero - your true compound annualised return.
For an investment with one outflow and one inflow, IRR equals CAGR. The power of IRR shows up with multiple cash flows: an investment of ₹10 lakh in year 0, ₹5 lakh more in year 2, returning ₹8 lakh in year 4 and ₹15 lakh in year 6 has no clean CAGR - but it has a well-defined IRR (in this case roughly 11.5%) that captures both the timing and magnitude of every cash flow.
IRR has limitations. Cash-flow series with multiple sign changes can have multiple mathematically valid IRRs. IRR also assumes intermediate cash flows can be reinvested at the IRR itself, which may not be realistic - a 25% IRR project doesn't actually deliver 25% in real life if you redeposit intermediate distributions at 7% FD rates. Modified IRR (MIRR) addresses this; for most retail and business analysis, plain IRR is the standard.
Year 0: -10 (down payment). Years 1-7: small operating loss/profit, net out to roughly zero. Year 7: 85 - outstanding loan balance ≈ 85 - 28 = ₹57 lakh net. IRR ≈ 28% on the ₹10 lakh cash invested. Sounds great but ignores the EMI burden during the holding period and assumes you funded EMIs from other income.
Cash flows: -50, 0, -25, 0, 20, 0, 0, 120. IRR ≈ 14.2%. The phased capital call and staggered returns are exactly the cash-flow profile IRR is designed to handle.
CAGR is for a single buy and a single sell. IRR is for any cash-flow series with multiple inflows/outflows. SIP returns, tranche-based investments and real-estate cash flows all need IRR.
IRR assumes equal time intervals between cash flows. XIRR handles irregular intervals (actual dates). For SIPs on the same day each month, both give similar results. For one-off lumpy investments, use XIRR.
Yes - if your total inflows are less than your outflows. Negative IRR signals a money-losing investment.
Cash-flow series with multiple sign changes (outflow → inflow → outflow → inflow) can have multiple mathematically valid IRRs. The calculator returns the first solution found near the initial guess.
Effectively yes - IRR is the constant annual rate that would have produced the same end value from the same cash flows.
Residential real estate typically delivers 8-12% IRR over 7-10 year holds (rent + appreciation). Commercial 12-18%. Equity benchmarks 11-14%. Anything below FD rates (6-7%) is poor.
Indian financial products - home loans, fixed deposits, mutual funds, NPS, insurance - each carry their own quirks: monthly reducing balance vs flat-rate interest, quarterly vs monthly compounding, indexation on capital gains, the choice between the old and new tax regime. We design every finance calculator to use the formula that an Indian bank, AMC, or insurer would actually use, and to surface the assumptions in plain English so you can audit the result against your own statement.
Use this calculator alongside the EMI, SIP and inflation calculators to plan your money holistically. A standalone EMI number means little until you compare it with your in-hand salary, your existing debt-to-income ratio, and the impact of inflation on the real cost of the loan. The related-tool grid below makes it one click to chain these analyses together.
The IRR Calculator is part of the Finance suite on Online Calculator Tools, alongside 6 related calculators. All tools share the same UI patterns, the same privacy-first rendering (nothing is sent to a server), and the same commitment to showing the formula and assumptions behind every result.
