By Ashutosh Joshi, PGDM (Finance), B.Com · Page last reviewed:
This glossary explains 85 Indian money terms in plain English, each with a worked Indian example where it helps. Tax terms use the new Income-tax Act, 2025 section numbers. Use the search box or the A–Z bar to jump to any term.
Key Highlights
- 85 Indian personal finance terms explained in plain English, from SIP and XIRR to repo rate and section 123.
- Tax terms use the new Income-tax Act, 2025 section numbers, with the old 1961 numbers alongside.
- Where it helps, each term has a worked Indian example and a link to the right calculator.
- Search box, category filters and an A–Z bar help you find a term quickly. Every term also has its own link you can share.
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A
Absolute return Investing
The total percentage gain or loss on an investment, without considering how long it took.
Example: ₹1 lakh growing to ₹1.5 lakh is a 50% absolute return, whether it took 2 years or 8.
Advance tax Tax
Paying tax in instalments during the year (15 June, 15 September, 15 December, 15 March) when your tax due is ₹10,000 or more.
AMC Mutual Funds
Asset Management Company: the fund house that runs mutual fund schemes, for example SBI Mutual Fund or HDFC Mutual Fund.
Asset allocation Investing
How you split your money between equity, debt, gold and cash. It drives most of a portfolio's risk and return.
Example: A 30-year-old might keep 70% in equity funds and 30% in PPF, FD and debt.
B
Bull and bear market Share Market
A bull market is a long stretch of rising prices; a bear market is a long stretch of falling prices, often taken as a 20% drop from the peak.
C
CAGR Investing
Compound Annual Growth Rate: the steady yearly rate at which an investment would have grown from its start value to its end value, as if returns came in evenly every year.
Example: ₹1 lakh that becomes ₹2 lakh in 6 years has a CAGR of about 12.25%.
Claim settlement ratio Insurance
Share of claims an insurer paid out of claims received in a year. Insurers publish it, and IRDAI's annual report lists it.
Compounding Investing
Earning returns on your earlier returns, not just on the money you put in. The longer you stay invested, the bigger this effect gets.
Example: ₹10,000 a month for 10 years at 12% a year (monthly compounding) grows to about ₹23.23 lakh, against ₹12 lakh invested.
Credit score Loans
A 3-digit number (300–900) from bureaus like CIBIL that sums up your repayment history. Higher scores get cheaper loans.
CRR and SLR Economy
Cash Reserve Ratio is the share of deposits banks must keep with RBI as cash; Statutory Liquidity Ratio is the share they must hold in safe assets like government bonds.
Cumulative vs non-cumulative FD Banking & Deposits
In a cumulative FD, interest is added back and paid at maturity. In a non-cumulative FD, interest is paid out monthly, quarterly or yearly.
D
Demat account Share Market
An account that holds your shares and ETFs in electronic form, maintained with NSDL or CDSL through a broker.
DICGC Banking & Deposits
Deposit Insurance and Credit Guarantee Corporation, an RBI subsidiary. It insures bank deposits up to ₹5 lakh per depositor per bank, principal and interest combined.
Direct vs Regular plan Mutual Funds
The same fund in two versions. Direct plans have no distributor commission, so their expense ratio is lower; regular plans are sold through distributors.
Diversification Investing
Spreading money across different assets, sectors or companies so one bad pick does not sink the whole portfolio.
E
EBLR Loans
External Benchmark Lending Rate: a bank's lending rate linked to an outside benchmark, mostly the RBI repo rate.
Education loan Loans
A loan for studies in India or abroad. In the old regime, interest paid is deductible under section 129 (old section 80E) for the first year and the next seven years (8 in all).
ELSS Mutual Funds
Equity Linked Savings Scheme: a tax-saving equity fund with a 3-year lock-in. It qualifies under section 123 (old section 80C) in the old tax regime.
Emergency fund Investing
Money set aside for job loss, medical bills or urgent repairs. Most planners suggest 6 months of expenses in safe, easy-to-access places.
EMI Loans
Equated Monthly Instalment: the fixed monthly payment that covers both interest and principal on a loan.
Example: A ₹30 lakh home loan at 8.15% for 20 years has an EMI of about ₹25,374; total interest is about ₹30.90 lakh.
EPF Govt Schemes
Employees' Provident Fund: retirement savings for salaried employees, with contributions from both you and your employer. EPFO credited 8.25% for FY 2025-26.
ETF Mutual Funds
Exchange Traded Fund: a fund that trades on the stock exchange like a share. You need a demat account to buy it.
Exit load Mutual Funds
A fee some funds charge if you redeem before a set period, often 1% if you exit within one year.
Expense ratio Mutual Funds
The yearly fee a fund charges, shown as a percentage of your investment. It is deducted from the NAV, so you never see a separate bill.
Example: A 1% expense ratio on ₹1 lakh costs about ₹1,000 a year.
Turn these terms into real numbers
Use our free calculators for SIP, PPF, FD, RD and EMI, built on Indian rules.
F
F&O Share Market
Futures and Options: derivative contracts whose value depends on a share or index. They use leverage, so gains and losses are magnified.
Example: SEBI's study found 93% of over 1 crore individual F&O traders made losses over FY22–FY24, averaging about ₹2 lakh each.
Fixed Deposit (FD) Banking & Deposits
A deposit that earns a fixed interest rate for a chosen tenure. Interest is taxed at your slab rate.
Example: ₹1 lakh at 7.5% for 5 years, compounded quarterly, grows to about ₹1,44,995.
Floating rate Loans
A loan rate that moves with a benchmark such as the repo rate, so your EMI or tenure can change.
Form 16 Tax
The certificate your employer issues showing your salary and the TDS deducted during the year.
G
GDP Economy
Gross Domestic Product: the total value of goods and services produced in India in a period, released by MoSPI.
I
Income-tax Act, 2025 Tax
The new income-tax law that replaced the Income-tax Act, 1961 from 1 April 2026. It renumbers sections and uses the term 'tax year'.
Example: Old section 80C is now section 123; 80D is section 126.
Index fund Mutual Funds
A fund that simply copies an index such as the Nifty 50, so costs are usually low.
Indexation Tax
Adjusting an asset's purchase price for inflation using the Cost Inflation Index, to lower taxable gains. For most long-term gains on transfers from 23 July 2024 it no longer applies (a flat 12.5% applies instead). Resident individuals and HUFs selling land or buildings bought before that date get grandfathering relief.
Inflation (CPI) Economy
How fast retail prices rise, measured by MoSPI's Consumer Price Index (base 2024=100). RBI targets 4% with a 2–6% band.
Example: CPI inflation was 5.54% in September 2026 (provisional).
Intraday trading Share Market
Buying and selling a share on the same day. Positions are closed before the market shuts.
Example: SEBI found 71% of individual intraday traders in the equity cash segment made a net loss in FY 2022-23.
IPO Share Market
Initial Public Offering: when a company sells its shares to the public for the first time and lists on an exchange.
ITR Tax
Income Tax Return: the yearly form in which you report income and tax to the Income Tax Department.
K
KVP Govt Schemes
Kisan Vikas Patra: a post office certificate that doubles your money. Rate 7.5%; certificates bought in Oct–Dec 2026 mature in 115 months.
KYC Banking & Deposits
Know Your Customer: identity and address checks (PAN, Aadhaar etc.) needed before you open an account or invest.
L
Loan tenure Loans
How long you take to repay a loan. A longer tenure lowers the EMI but raises total interest.
LTCG Tax
Long-term capital gains. On listed equity and equity funds held over 12 months, gains above ₹1.25 lakh a year are taxed at 12.5%.
Lump sum Mutual Funds
Investing a large amount in one go instead of spreading it out through a SIP.
M
MPC Economy
Monetary Policy Committee: the six-member RBI panel that sets the repo rate, normally six times a year.
N
NAV Mutual Funds
Net Asset Value: the price of one unit of a mutual fund. It is calculated at the end of each business day.
Nifty 50 Share Market
NSE's benchmark index of 50 large companies across sectors.
NPS Govt Schemes
National Pension System, regulated by PFRDA: a market-linked retirement account with equity, corporate bond and government bond options.
NSC Govt Schemes
National Savings Certificate: a 5-year post office certificate. Rate 7.7% for Oct–Dec 2026, compounded yearly and paid at maturity.
O
Old vs new tax regime Tax
Two ways to compute your tax. The new regime (default) has lower slab rates but few deductions; the old regime keeps deductions like section 123 and 126.
P
P/E ratio Share Market
Price-to-Earnings ratio: share price divided by earnings per share. It shows how much investors pay for each rupee of profit.
POMIS Govt Schemes
Post Office Monthly Income Scheme: a 5-year deposit that pays interest every month. Rate 7.4% for Oct–Dec 2026.
Post Office Time Deposit Govt Schemes
The post office version of an FD, for 1, 2, 3 or 5 years. Oct–Dec 2026 rates: 6.9%, 7.0%, 7.1% and 7.5%.
PPF Govt Schemes
Public Provident Fund: a 15-year government savings scheme with EEE tax status. Deposits of ₹500 to ₹1.5 lakh a year; rate 7.1% for Oct–Dec 2026.
Example: ₹1.5 lakh a year for 15 years at 7.1% grows to about ₹40.68 lakh.
Premature withdrawal Banking & Deposits
Breaking a deposit before maturity. Banks usually pay a lower rate plus a penalty of around 0.5–1%.
Premium Insurance
What you pay the insurer, monthly or yearly, to keep a policy active.
Prepayment Loans
Paying part of a loan early to cut interest. Under RBI's Pre-payment Charges Directions, 2025, lenders cannot charge any pre-payment fee on floating-rate loans taken by individuals for non-business purposes, for loans sanctioned or renewed from 1 January 2026.
🧮 Try the Prepayment vs investment calculator Official source ↗
Principal Loans
The amount you actually borrowed, before interest.
R
Real return Investing
Your return after removing inflation. It tells you how much your purchasing power actually grew.
Example: PPF at 7.1% with CPI inflation at 5.54% (Sep 2026) gives a real return of about 1.48%.
Rebate (section 156) Tax
A tax rebate (old section 87A). In the new regime it makes income up to ₹12 lakh tax-free; with the ₹75,000 standard deduction, salary up to ₹12.75 lakh pays no tax.
Recurring Deposit (RD) Banking & Deposits
Depositing a fixed amount every month for a fixed tenure at a fixed rate. The Post Office 5-year RD pays 6.7% (Oct–Dec 2026).
Repo rate Economy
The rate at which the RBI lends short-term money to banks. When it rises, loan EMIs (and often FD rates) follow.
📖 Read: Live RBI rates📖 Read: Repo hike and your EMI Official source ↗
Rider Insurance
An add-on to a policy, such as accidental death or critical illness cover, for an extra premium.
Risk profile Investing
How much ups and downs you can handle, both financially and emotionally. It depends on age, income, goals and temperament.
Rupee cost averaging Investing
Investing a fixed amount at regular intervals. You buy more units when prices are low and fewer when they are high, which smooths out your average cost.
S
Savings account Banking & Deposits
A basic bank or post office account for everyday money. The Post Office savings account pays 4.0% (Oct–Dec 2026).
SCSS Govt Schemes
Senior Citizens' Savings Scheme: a 5-year scheme for people 60+ that pays interest every quarter. Rate 8.2% for Oct–Dec 2026.
SDF and MSF Economy
Standing Deposit Facility (where banks park extra money with RBI) and Marginal Standing Facility (emergency overnight borrowing). They form the floor and ceiling of the policy corridor.
Section 123 (old 80C) Tax
Deduction of up to ₹1.5 lakh a year for PPF, ELSS, EPF, life insurance premium, home loan principal and more. Old regime only.
Section 126 (old 80D) Tax
Deduction for health insurance premiums for yourself, family and parents. Old regime only.
Senior citizen rate Banking & Deposits
Extra interest banks pay to depositors aged 60 and above, often 0.5% more than the regular rate.
Sensex Share Market
BSE's benchmark index of 30 large, actively traded companies.
SIP Mutual Funds
Systematic Investment Plan: investing a fixed amount in a mutual fund every month (or week) through auto-debit.
Small savings schemes Govt Schemes
Government-backed schemes (PPF, SSY, SCSS, NSC, KVP, POMIS, Post Office deposits) whose rates the Finance Ministry resets every quarter.
SSY Govt Schemes
Sukanya Samriddhi Yojana: a savings scheme for a girl child under 10, opened by a parent or guardian. Rate 8.2% for Oct–Dec 2026.
Standard deduction Tax
A flat deduction from salary or pension income: ₹75,000 in the new regime and ₹50,000 in the old regime.
STCG Tax
Short-term capital gains. On listed equity held 12 months or less, the rate is 20%.
Step-up SIP Investing
A SIP where the monthly amount rises by a fixed percentage every year, usually in line with your salary hikes.
Example: Our calculators assume a 10% yearly step-up by default.
STP Mutual Funds
Systematic Transfer Plan: moving a fixed amount regularly from one fund (usually liquid or debt) to another (usually equity) within the same fund house.
Sum assured Insurance
The amount the insurer promises to pay on a claim. A common rule of thumb for life cover is 10–15 times annual income.
Sweep-in FD Banking & Deposits
A savings account linked to an FD. Extra balance moves into the FD to earn more, and comes back automatically when you need it.
SWP Mutual Funds
Systematic Withdrawal Plan: taking out a fixed amount from a mutual fund at regular intervals, often used for retirement income.
T
Tax year Tax
Under the 2025 Act, the 12-month period from 1 April to 31 March in which you earn income. It replaces 'previous year' and 'assessment year'.
TDS Tax
Tax Deducted at Source: tax cut by the payer (employer, bank) before paying you. It shows up in Form 26AS / AIS and is adjusted when you file.
Term insurance Insurance
Pure life cover for a fixed term. If you die during the term, your family gets the sum assured; there is no maturity payout.
U
ULIP Insurance
Unit Linked Insurance Plan: insurance plus market-linked investment, with a 5-year lock-in.
📖 Read: What is ULIP📖 Read: ULIP vs term plan Official source ↗
W
Whole life insurance Insurance
A life policy that covers you up to age 99 or 100 rather than a fixed term.
X
XIRR Investing
Extended Internal Rate of Return. It works like CAGR but handles many cash flows on different dates, which is why mutual fund apps use it to show SIP returns.
Example: If you invest ₹5,000 on different dates every month, XIRR gives one annual return for the whole SIP.
Popular calculators
Want the full story behind a term?
Our guides explain PPF, FDs, tax, insurance and loans with worked Indian examples.
Diving Finance view: expert take by Ashutosh Joshi
- Learn these five first: SIP, XIRR, real return, repo rate and EMI. They explain most money decisions.
- Always compare returns after tax and after inflation (we plan with 6%). A 7% FD in the 30% slab gives about 4.82% after tax.
- Monthly surplus goes to SIPs; lump sums prepay the home loan; the emergency fund stays in FDs.
This is general guidance, not personal advice. Check your own goals, tax slab and risk appetite.
FAQs
What is a finance glossary?
A list of money words with short, plain definitions. This one is written for Indian readers, so it covers PPF, SSY, EMI, repo rate and the new Income-tax Act sections.
Why do tax terms show two section numbers?
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act and renumbered sections. Old 80C is now section 123, for example. We show both so older articles still make sense.
Can I link to a single term?
Yes. Every term has its own anchor, for example divingfinance.com/glossary/#xirr.
How often is the glossary updated?
Whenever a rule or rate it mentions changes. Live rates are kept on our Live Rates & Data page.
Change log
- 21 Oct 2026 – Glossary launched with 85 terms. Rates quoted are for Oct–Dec 2026; see Live Rates & Data.
For information only, not investment advice. Examples use simple assumptions; actual returns vary.