Finance glossary
Plain-English definitions of 36 Indian personal-finance terms — each with a real example and a link to the tool that uses it.
Investing
CAGR · Compound Annual Growth RateCAGR is the constant yearly rate at which an investment would have grown from its starting value to its ending value over a period.CompoundingCompounding is when the returns you earn start earning returns of their own, so growth accelerates over time.ELSS · Equity Linked Savings SchemeELSS is a type of equity mutual fund that qualifies for a tax deduction under Section 80C, with the shortest lock-in of any 80C option — just 3 years.Expense RatioThe expense ratio is the annual fee a mutual fund charges, expressed as a percentage of your invested amount, deducted from the fund before the NAV is calculated.NAV · Net Asset ValueNAV is the per-unit price of a mutual fund — the fund's total assets minus its liabilities, divided by the number of units outstanding.Rupee Cost AveragingRupee cost averaging is the effect of investing a fixed amount regularly: you automatically buy more units when prices are low and fewer when prices are high.SIP · Systematic Investment PlanA SIP is a way of investing a fixed amount in a mutual fund at regular intervals — usually a set sum every month — instead of investing a lump sum.Step-up SIP · Top-up SIPA step-up SIP automatically increases your monthly investment by a set percentage each year, usually in line with your salary growth.SWP · Systematic Withdrawal PlanAn SWP lets you withdraw a fixed amount from a mutual fund at regular intervals while the rest stays invested and keeps growing.XIRR · Extended Internal Rate of ReturnXIRR is the single annualised return that accounts for investments made on different dates — the right way to measure a SIP's actual return.
Tax
HRA Exemption · House Rent AllowanceHRA exemption lets salaried people who pay rent reduce their taxable income — available only under the old regime.IndexationIndexation adjusts an asset's purchase price upward for inflation, reducing the taxable capital gain on certain long-term assets.LTCG · Long-Term Capital GainsLTCG is the profit on an asset held beyond a threshold period — and it is taxed at a lower rate than short-term gains.New Tax RegimeThe new tax regime offers lower slab rates but removes almost all deductions and exemptions — and it is now the default.Section 80CSection 80C lets you deduct up to ₹1.5 lakh a year from your taxable income for specified investments and expenses — but only under the old tax regime.Section 80DSection 80D allows a deduction for health-insurance premiums — up to ₹25,000 for yourself and family, and another ₹25,000 (₹50,000 if senior citizens) for parents.Section 87A RebateThe Section 87A rebate cancels your income tax entirely if your taxable income is at or below a threshold — making lower incomes effectively tax-free.Standard DeductionThe standard deduction is a flat amount subtracted from salary income before tax, with no bills or proof required.STCG · Short-Term Capital GainsSTCG is the profit on an asset sold within the short-term holding period, taxed at a higher rate than long-term gains.TDS · Tax Deducted at SourceTDS is tax that the payer deducts before paying you — on salary, interest, rent or professional fees — and deposits with the government on your behalf.
Loans
CIBIL Score · Credit ScoreA CIBIL score is a 3-digit number (300–900) summarising your credit history, used by lenders to decide whether to lend and at what rate.EMI · Equated Monthly InstalmentAn EMI is the fixed amount you pay your lender every month until a loan is repaid — covering both interest and principal.Floating RateA floating interest rate moves up and down over the life of a loan, tracking a benchmark such as the RBI repo rate.Loan TenureThe tenure is the total length of a loan — the number of months or years over which you repay it.PrepaymentPrepayment is paying off part or all of a loan ahead of schedule, which directly reduces the outstanding principal.Reducing Balance · Reducing Balance InterestReducing-balance interest is charged only on the outstanding loan balance, which shrinks with every EMI — so the interest portion falls over time.
Banking & savings
Compound InterestCompound interest is interest calculated on both the original principal and the interest already added — so the balance grows faster over time.EPF · Employees' Provident FundEPF is a retirement savings scheme for salaried employees, where you and your employer each contribute 12% of basic pay every month.Fixed Deposit · FDAn FD is a deposit that locks a lump sum with a bank for a fixed term at a fixed interest rate, paying more than a savings account.NPS · National Pension SystemNPS is a market-linked retirement scheme where you invest until age 60, then take part as a lump sum and use the rest to buy a pension (annuity).PPF · Public Provident FundPPF is a 15-year government savings scheme with tax-free interest, a deduction under 80C, and complete capital safety.Recurring Deposit · RDAn RD lets you deposit a fixed amount every month for a set term at a fixed interest rate — a disciplined way to save without a lump sum.Repo RateThe repo rate is the interest rate at which the RBI lends to commercial banks — the benchmark that drives loan and deposit rates across the economy.Simple InterestSimple interest is charged only on the original principal, never on accumulated interest — so it grows in a straight line.