📖 Financial Glossary
104 financial terms explained in plain language. From EMI to XIRR, Section 80C to GSTIN — everything you need to understand Indian finance.
A
A series of regular payments made over a defined period. In the NPS context, 40% of the corpus at retirement must be use…
The year following the financial year in which income is assessed and tax return is filed. For example, income earned in…
The process of spreading loan payments over the full tenure. An amortization schedule shows the breakdown of each EMI in…
Assets Under Management — the total market value of investments managed by a mutual fund. Higher AUM generally indicates…
Tax paid in installments during the financial year if your total tax liability exceeds ₹10,000. Due dates: 15% by June 1…
The distribution of investments across different asset categories. Common rule: equity allocation = 100 − your age. So a…
B
Body Mass Index — a measure of body fat based on height and weight. Calculated as weight (kg) divided by height squared …
Moving an existing loan from one lender to another offering better terms (typically a lower interest rate). Common for h…
A standard against which the performance of a mutual fund or portfolio is measured. Common Indian benchmarks: Nifty 50 (…
The point at which total revenue equals total costs — no profit, no loss. In loan context, it indicates when the savings…
C
A credit score assigned by TransUnion CIBIL ranging from 300-900. It reflects your creditworthiness based on loan repaym…
An asset pledged as security for a loan. If the borrower defaults, the lender can seize the collateral. Home loans use t…
Compound Annual Growth Rate — the mean annual growth rate of an investment over a specified time period longer than one …
Interest calculated on both the initial principal and the accumulated interest from previous periods. Often called 'inte…
Central GST — the portion of GST collected by the Central Government on intra-state transactions. For any intra-state sa…
Tax on profit from the sale of capital assets (property, stocks, gold, etc.). Short-term capital gains (STCG) on equity:…
Health and Education Cess — a 4% surcharge on the total income tax (including surcharge). Cess is levied to fund specifi…
A simplified GST scheme for small businesses with turnover up to ₹1.5 Crore (goods) or ₹50 Lakh (services). Offers lower…
A numerical representation of creditworthiness, typically ranging from 300-900 in India. Factors: repayment history (35%…
A person who jointly takes a loan with the primary borrower. Both are equally responsible for repayment. Common in home …
D
The initial upfront portion of the total purchase price paid by the buyer from their own funds. For home loans, typicall…
A portion of a company's profits distributed to shareholders. In mutual funds, dividend option means periodic payouts fr…
An electronic account that holds stocks, bonds, and mutual fund units in dematerialized (digital) form. Required for tra…
The reduction in value of an asset over time due to wear and tear. In tax context, businesses can claim depreciation as …
The strategy of spreading investments across different asset classes (equity, debt, gold, real estate) to reduce risk. '…
The actual release of loan funds to the borrower's account. Can be full (personal/car loan) or partial (home loan — disb…
The percentage reduction from the original price. Used in calculating sale prices, markdowns, and promotional offers. Th…
E
Equated Monthly Instalment — a fixed payment amount made by a borrower to a lender at a specified date each month. EMI c…
Equity Linked Savings Scheme — tax-saving mutual funds with the shortest lock-in period of 3 years among all Section 80C…
The annual fee charged by a mutual fund for managing investors' money, expressed as a percentage of assets. Lower expens…
External Benchmark Lending Rate — a lending rate linked to an external benchmark (typically RBI repo rate). Introduced i…
A fee charged when you redeem (sell) mutual fund units before a specified period. Typically 1% if redeemed within 1 year…
An electronic document required for movement of goods worth more than ₹50,000. Generated on the e-way bill portal. Conta…
When an EMI payment fails due to insufficient funds in the linked bank account. Consequences: ₹500-1,000 penalty per bou…
F
A method where interest is calculated on the original loan amount for the entire tenure, regardless of repayments made. …
Closing a loan entirely before the tenure ends by paying off the full outstanding balance. For floating rate loans, bank…
A financial instrument where you deposit a lump sum with a bank for a fixed tenure at a predetermined interest rate. FDs…
A TDS certificate issued by employers to salaried employees, containing details of salary, allowances, deductions, TDS d…
An interest rate that changes periodically based on a benchmark rate (like RBI repo rate). Floating rates are typically …
An interest rate that remains constant throughout the loan tenure. Provides EMI certainty but is typically 1-2% higher t…
The 12-month period used for accounting and tax purposes in India, running from April 1 to March 31. Income earned durin…
G
Goods and Services Tax — a comprehensive indirect tax on the supply of goods and services in India. Replaced multiple ta…
GST Identification Number — a 15-digit unique number assigned to every registered GST taxpayer. Format: 2-digit state co…
A person who guarantees to repay a loan if the primary borrower defaults. The guarantor's CIBIL score is affected if the…
H
I
The percentage charged by a lender on the principal amount, typically expressed as an annual percentage. Can be fixed (u…
A type of mutual fund that tracks a market index (like Nifty 50 or Sensex). Index funds have lower expense ratios (0.1-0…
A direct tax levied by the government on the income earned by individuals and entities. In India, income tax is administ…
Integrated GST — levied on inter-state supply of goods and services (and imports). Collected by the Central Government a…
The GST paid on business purchases that can be used to offset GST collected on sales. ITC reduces the net GST payable. C…
Income Tax Return — the form used to file income tax with the government. Multiple forms exist: ITR-1 (salaried, income …
A method of adjusting the purchase price of a capital asset using the Cost Inflation Index (CII) to account for inflatio…
The rate at which the general level of prices for goods and services rises, reducing purchasing power. India's target in…
K
L
Loan-to-Value ratio — the percentage of the property/asset value that a bank will finance. For home loans: up to 90% for…
Long Term Capital Gains — profit from selling assets held for more than a specified period. For equity/mutual funds: 12+…
The minimum duration for which an investment must be held before it can be redeemed. ELSS: 3 years. PPF: 15 years (parti…
The ease with which an asset can be converted into cash without significant loss of value. Savings accounts and liquid m…
M
A grace period during which the borrower is not required to make loan repayments. Common in education loans (course dura…
A professionally managed investment vehicle that pools money from multiple investors to invest in stocks, bonds, or othe…
The total amount receivable at the end of an investment's term. For FDs and RDs, maturity value = principal + compound i…
Marginal Cost of Funds based Lending Rate — the minimum interest rate below which banks are not permitted to lend. Intro…
Government-backed loans under Pradhan Mantri MUDRA Yojana for micro/small businesses up to ₹10 Lakh. Three categories: S…
The amount added to the cost price to determine the selling price. Expressed as a percentage of cost. A 50% markup on ₹1…
N
Net Asset Value — the per-unit value of a mutual fund scheme. Calculated daily as (Total Assets − Total Liabilities) ÷ N…
National Pension System — a government-sponsored retirement savings scheme. Offers equity, corporate bonds, and governme…
The simplified tax regime introduced in Budget 2020, made default from FY 2024-25. Offers lower tax rates but with minim…
No Objection Certificate — a document issued by the lender after a loan is fully repaid, confirming that the borrower ha…
O
P
The original sum of money borrowed in a loan or invested. In a loan context, the principal is the amount you owe excludi…
Paying part or all of a loan before its scheduled due date. Prepayment reduces the outstanding principal, leading to les…
A one-time charge by the lender for processing a loan application. Typically 0.5-2% of the loan amount or a flat fee of …
Public Provident Fund — a government-backed savings scheme with a 15-year lock-in offering tax-free returns (currently 7…
A tax levied by state governments on professionals and salaried individuals. Maximum amount: ₹2,500 per year (varies by …
Permanent Account Number — a 10-character alphanumeric identifier issued by the Income Tax Department. Required for fili…
A fraction expressed as a portion of 100. Used extensively in finance for interest rates, returns, tax rates, and growth…
Interest charged on the disbursed loan amount before the full loan is disbursed. Common in under-construction property l…
The exponential growth effect where investment earnings generate their own earnings. ₹10,000 at 12% grows to ₹31,058 in …
R
A method of calculating interest where the interest is computed on the outstanding loan balance after each EMI payment. …
The rate at which the Reserve Bank of India (RBI) lends money to commercial banks. Banks' lending rates are linked to th…
A savings scheme where you deposit a fixed amount every month for a predetermined tenure. At maturity, you receive the t…
The investment strategy behind SIPs where a fixed amount is invested regularly regardless of market conditions. When pri…
A quick formula to estimate how long it takes to double your money: 72 ÷ interest rate = years to double. At 8%: 9 years…
Investment returns adjusted for inflation. Real Return = Nominal Return − Inflation Rate. An FD at 7% with 5% inflation …
S
Systematic Investment Plan — a method of investing a fixed amount at regular intervals (typically monthly) in mutual fun…
Interest calculated only on the original principal amount. Unlike compound interest, previously earned interest does not…
A provision under the Income Tax Act allowing a deduction of up to ₹1,50,000 on investments in specified instruments inc…
Tax deduction for health insurance premiums. Self + family: up to ₹25,000. Parents below 60: up to ₹25,000. Parents abov…
Allows deduction of up to ₹2,00,000 on home loan interest for self-occupied property. For rented property, the entire in…
State GST — the portion of GST collected by the State Government on intra-state transactions. Combined with CGST, it for…
Short Term Capital Gains — profit from selling assets held for less than the specified period. STCG on equity (held < 12…
An additional tax levied on taxpayers whose income exceeds certain thresholds. Surcharge is calculated on the income tax…
A tax paid to the state government when purchasing property. Rates vary by state: Maharashtra (5-6%), Karnataka (5%), De…
A flat deduction from salary income, available without any proof of expenditure. ₹75,000 in new regime (increased from ₹…
Tax deduction on interest paid on education loan. No upper limit on the deduction amount (unlike home loan cap of ₹2L). …
Services Accounting Code — used to classify services under GST, similar to HSN codes for goods. 6-digit codes. For examp…
An official document from the bank approving your loan application. Contains: sanctioned amount, interest rate, tenure, …
T
The duration or time period of a loan, typically measured in months or years. Longer tenure means lower EMI but higher t…
The income ranges at which different tax rates apply. India uses a progressive tax system where higher income is taxed a…
Tax Deducted at Source — a mechanism where the payer deducts tax before making payment and deposits it with the governme…
A rebate for resident individuals where the entire tax liability is waived if taxable income is ≤ ₹7 Lakh (new regime) o…