GLOSSARY
Financial Glossary
Plain-language definitions of the terms you'll meet while managing money in India — no jargon, no fluff.
A
- Account Aggregator (AA)
- An RBI-licensed entity that lets you share your financial data between institutions with explicit, revocable consent. The backbone of secure, read-only data access in India.
- AIS (Annual Information Statement)
- A statement from the Income Tax Department showing the financial transactions reported against your PAN — interest, dividends, securities trades and more.
- Asset Allocation
- How your money is split across asset classes like equity, debt, gold and cash. The biggest driver of long-term portfolio risk and returns.
B
- Bond
- A loan you give to a government or company in exchange for regular interest and your money back at maturity. Generally lower risk than equity.
C
- CAGR (Compound Annual Growth Rate)
- The smoothed yearly growth rate of an investment over a period — the standard way to compare returns across different time frames.
- Capital Gain
- The profit from selling an asset (shares, mutual funds, property) for more than you paid. Taxed as short-term or long-term depending on how long you held it.
- CIBIL Score
- A credit score between 300 and 900 from TransUnion CIBIL that lenders use to judge your creditworthiness. Higher is better; 750+ is generally considered strong.
- Compounding
- Earning returns on your returns. The reason starting early matters more than starting big.
D
- Demat Account
- An account that holds your shares and securities in electronic form. Required for trading on NSE and BSE.
- Diversification
- Spreading investments across assets, sectors and geographies so no single failure sinks your portfolio.
- Dividend
- A share of profits a company pays its shareholders. Taxed as income at your slab rate in India.
E
- ELSS (Equity Linked Savings Scheme)
- A tax-saving equity mutual fund eligible for Section 80C deduction, with the shortest lock-in of all 80C options — 3 years.
- Emergency Fund
- Cash set aside for job loss or surprise expenses — commonly 3 to 6 months of living costs, kept liquid.
- EPF (Employees' Provident Fund)
- A mandatory retirement savings scheme for salaried employees. Your contribution qualifies for Section 80C deduction.
- ETF (Exchange Traded Fund)
- A fund that tracks an index or asset and trades on the stock exchange like a share — typically with very low fees.
- Expense Ratio
- The annual fee a mutual fund or ETF charges, as a percentage of your investment. Lower is better; it compounds against you.
F
- Fixed Deposit (FD)
- A bank deposit with a guaranteed interest rate for a fixed term. Tax-saver FDs (5-year lock-in) qualify for Section 80C.
- Form 26AS
- Your consolidated tax statement — TDS deducted, taxes paid and refunds against your PAN for the year.
H
- HRA (House Rent Allowance)
- A salary component that is partially tax-exempt if you pay rent — one of the biggest tax breaks for salaried renters under the old regime.
I
- Index Fund
- A mutual fund that passively tracks a market index like the Nifty 50 instead of picking stocks. Low cost, market-matching returns.
- ITR (Income Tax Return)
- The annual filing that reports your income, deductions and taxes to the Income Tax Department. Filing on time preserves your right to carry forward losses.
K
- KYC (Know Your Customer)
- The identity-verification process (PAN, Aadhaar, address) required before opening any financial account in India.
L
- LTCG (Long-Term Capital Gains)
- Profit on assets held beyond the qualifying period (over 12 months for listed equity). Equity LTCG above the annual exemption is taxed at a concessional rate.
M
- Mutual Fund
- A pooled investment vehicle where a fund house invests many people's money across stocks, bonds or both, managed under SEBI regulation.
N
- Net Worth
- Everything you own (assets) minus everything you owe (liabilities). The single best number for tracking financial progress.
- Nifty 50 / Sensex
- India's benchmark stock indices — the 50 largest NSE companies and the 30 largest BSE companies respectively.
- NPS (National Pension System)
- A government-regulated retirement scheme with an extra deduction of up to ₹50,000 under Section 80CCD(1B), over and above the 80C limit.
- NSE / BSE
- India's two main stock exchanges — the National Stock Exchange and the Bombay Stock Exchange.
P
- PAN (Permanent Account Number)
- Your unique tax identity in India, required for investing, large transactions and filing returns.
- PPF (Public Provident Fund)
- A government-backed savings scheme with a 15-year term, tax-free interest, and Section 80C eligibility. One of the safest long-term instruments.
R
- REIT (Real Estate Investment Trust)
- A listed vehicle that owns income-generating real estate, letting you invest in commercial property with small amounts.
S
- Section 80C
- The most-used income tax deduction in India — up to ₹1.5 lakh a year for investments like EPF, PPF, ELSS and life insurance premiums, available under the old tax regime.
- SIP (Systematic Investment Plan)
- Investing a fixed amount into a mutual fund at a regular interval, typically monthly. Automates discipline and averages your purchase price.
- STCG (Short-Term Capital Gains)
- Profit on assets sold within the qualifying holding period (12 months or less for listed equity). Taxed at a higher rate than long-term gains.
- SSY (Sukanya Samriddhi Yojana)
- A government savings scheme for a girl child with high tax-free interest and Section 80C eligibility.
T
- Tax-Loss Harvesting
- Selling loss-making investments to offset taxable capital gains, reducing your tax bill. Losses can be carried forward for up to 8 years if you file your ITR on time.
- TDS (Tax Deducted at Source)
- Tax deducted by the payer (employer, bank) before money reaches you, and deposited against your PAN.
X
- XIRR
- The annualised return of investments with irregular cash flows — the right way to measure SIP returns.