Glossary

Money jargon, in plain English

124 financial terms explained the way a smart friend would — no dictionary-speak, real Indian examples, and what it means for you.

Investing

Asset allocation

How you split your money across equity, debt, gold and cash based on your goals and risk.

AUM

The total amount of money a mutual fund or fund house is currently managing.

Benchmark

The market index a fund compares itself against to show whether it is doing well.

Bond

A loan you give to a government or company that pays you fixed interest and returns your money later.

CAGR

The steady yearly rate at which a single investment grew, smoothing out the ups and downs.

Compounding

When your returns start earning their own returns, making money snowball over time.

Debt fund

A mutual fund that invests in bonds and other loans instead of stocks, aiming for steadier returns.

Demat account

An electronic account that holds your shares, ETFs and bonds in digital form.

Direct vs regular plan

Direct plans cut out the middleman commission, so they cost less and grow more than regular plans.

Dividend

A share of a company's profits paid out in cash to shareholders.

ELSS

An equity mutual fund that also saves tax under Section 80C, with a 3-year lock-in.

Equity

Ownership in a company; buying equity means owning a small slice of a business.

ETF

An index-tracking fund that trades on the stock exchange like a share, throughout the day.

Exit load

A small penalty fee charged if you withdraw from a fund before a set period, often one year.

Expense ratio

The yearly fee a mutual fund charges you, expressed as a percentage of your money.

Folio number

A unique account number that identifies all your investments with one mutual fund house.

Fund manager

The professional who decides what a mutual fund buys and sells on behalf of investors.

Gilt fund

A debt fund that lends only to the government, so there is virtually no risk of default.

Index fund

A fund that simply copies a market index like the Nifty 50 instead of trying to beat it.

Liquid fund

A very low-risk debt fund for parking money you may need within days or weeks.

Lock-in period

A fixed time during which you cannot withdraw your invested money.

Lumpsum

Investing a large amount into a fund in one go, rather than spreading it out monthly.

Market cap (large, mid, small)

The total value of a company's shares, used to sort funds into large, mid, and small cap buckets.

Mutual fund

A pool where many investors money is collected and invested by a fund manager across many stocks or bonds.

NAV

The per-unit price of a mutual fund, calculated once at the end of each trading day.

NFO

The first launch of a new mutual fund, sold at a fixed ₹10 unit price.

Rebalancing

Periodically adjusting your portfolio back to your target mix of equity and debt.

Risk profile

How much investment ups and downs you can handle, both financially and emotionally.

Rupee cost averaging

The effect of a SIP buying more units when prices are low and fewer when high, averaging your cost.

SIP

Investing a fixed amount into a mutual fund automatically every month instead of all at once.

Sovereign Gold Bond

Government-issued bonds that track the price of gold and also pay a small yearly interest.

Step-up SIP

A SIP that automatically increases your monthly amount every year, usually in line with your salary.

STP

Automatically moving money from one fund to another in installments, usually debt to equity.

SWP

The reverse of a SIP, where you withdraw a fixed amount from a fund every month.

XIRR

The true annualised return of your investments when you put in money at different times, like a SIP.

Tax

Advance tax

Paying your income tax in installments through the year instead of one lump sum at the end.

Capital gains

The profit you make when you sell an asset like shares, funds, or property for more than you paid.

Cess

An extra 4% charged on top of your income tax, earmarked for health and education.

Form 16

A certificate from your employer showing your salary and the tax they deducted during the year.

Gratuity

A lump sum an employer pays you for long service, largely tax-free up to a limit.

Gross vs net salary

Gross is your total package on paper; net is what actually lands in your bank after deductions.

HRA

A salary component that gives tax relief on rent you actually pay, under the old regime.

Income tax slab

The tiered rate system where higher chunks of your income are taxed at higher percentages.

Indexation

Adjusting an asset's purchase price for inflation to reduce the taxable capital gain.

ITR

The annual form you file with the tax department declaring your income and tax paid.

LTA

A salary component that gives tax exemption on travel costs within India for you and family.

LTCG

Tax on profits from long-held assets, taxed at lower rates, with a yearly exemption on equity gains.

Old vs new tax regime

Two ways to calculate income tax: the old one with deductions, or the new one with lower rates but few breaks.

Professional tax

A small state-level tax on salaried and self-employed people, capped at ₹2,500 a year.

Rebate under 87A

A rebate that makes income tax effectively zero for those below a set income threshold.

Section 44ADA

A scheme letting eligible professionals declare 50% of income as profit, skipping detailed books.

Section 80C

The most popular tax deduction, letting you cut up to ₹1.5L from taxable income via approved investments.

Section 80D

A tax deduction for health insurance premiums you pay for yourself and your family.

Standard deduction

A flat amount automatically subtracted from a salaried person's income before tax, no proof needed.

STCG

Tax on profits from assets sold quickly, like equity held under a year, taxed at a higher rate.

Surcharge

An extra tax on top of income tax for high earners, kicking in above ₹50L of income.

Taxable income

The portion of your income left after all exemptions and deductions, on which tax is actually calculated.

TDS

Tax cut directly from your income by the payer before the money even reaches you.

Loans & credit

APR

The true yearly cost of a loan including interest plus fees, giving a fairer comparison than the rate alone.

Billing cycle

The monthly period over which your credit card tracks spending before generating a bill.

Collateral

An asset you pledge against a loan that the lender can take if you fail to repay.

Credit card

A card that lets you spend borrowed money up to a limit, interest-free if you pay in full on time.

Credit score (CIBIL)

A 300-900 number that rates how reliably you repay debt, deciding your loan approvals and rates.

Credit utilisation

The share of your credit card limit you are using; keeping it low protects your credit score.

Education loan

A loan to fund studies, often with a repayment holiday until after the course ends.

EMI

The fixed monthly payment you make to repay a loan, covering both interest and principal.

Forex markup

An extra fee, usually 2-3.5%, charged on credit and debit card spends in foreign currency.

Grace period

The window between your credit card bill date and due date when no interest is charged.

Home loan

A long-term secured loan to buy property, offering the lowest interest rates among common loans.

Interest

The extra cost you pay a lender for borrowing money, usually a yearly percentage.

Loan tenure

The total time you take to repay a loan, which decides your EMI size and total interest.

Minimum amount due

The smallest amount you must pay on a credit card bill to avoid a late fee; a dangerous trap.

Moratorium

A pause on loan repayments for a set period, though interest usually keeps piling up.

NBFC

A lender that offers loans and credit but isn't a full bank and can't hold savings accounts.

Personal loan

An unsecured loan you can use for almost anything, quick to get but expensive.

Prepayment and foreclosure

Paying off part or all of a loan early to slash the interest you would otherwise pay.

Principal

The actual amount you borrowed, before any interest is added on top.

Processing fee

A one-time charge a lender adds for setting up your loan, usually a small percentage of it.

Reducing vs flat interest rate

Reducing rate charges interest on the shrinking balance; flat rate charges on the full amount throughout.

Secured vs unsecured loan

Secured loans are backed by an asset like a house; unsecured loans have no collateral and cost more.

Insurance

Claim settlement ratio (CSR)

The percentage of claims an insurer actually paid out, a key trust signal for life insurers.

Co-pay

A fixed share of every claim you must pay yourself, with the insurer covering the rest.

Deductible

The amount you agree to pay yourself before the insurer starts covering a claim.

Family floater

A single health policy that covers your whole family under one shared sum insured.

Health insurance

A policy that covers hospital and medical bills so a health crisis doesn't wipe out your savings.

Incurred claim ratio (ICR)

How much an insurer paid in claims versus premiums collected, a health-insurer health check.

IRDAI

The government body that regulates insurance companies and protects policyholders in India.

No-claim bonus (NCB)

A reward for not making claims, boosting your cover or cutting your premium each claim-free year.

Premium

The amount you pay, usually yearly, to keep an insurance policy active.

Restoration benefit

A feature that refills your health cover to full if you exhaust it during the year.

Rider

An optional add-on that boosts a base insurance policy for a small extra premium.

Room rent limit

A cap on how much daily hospital room cost your health policy will cover.

Sum assured / insured

The maximum amount an insurer will pay out on a claim under your policy.

Term insurance

Pure life cover that pays your family a large sum if you die during the policy term, at a tiny premium.

ULIP

A product mixing insurance and investment, usually giving you a mediocre version of both.

Waiting period

The time you must hold a health policy before certain conditions or treatments become claimable.

Banking & savings

CASA

A banking term for the combined cheap deposits banks hold in current and savings accounts.

Compounding frequency

How often interest gets added to your balance; more frequent compounding means more money.

Current account

A bank account for businesses with unlimited transactions but no interest on the balance.

Emergency fund

A cash buffer of 3-6 months of expenses set aside for job loss, medical shocks, or repairs.

Fixed deposit

A deposit where you lock money with a bank for a fixed term at a guaranteed interest rate.

Inflation

The steady rise in prices over time that quietly erodes what your money can buy.

Interest rate

The percentage a bank pays you on deposits or charges you on loans, per year.

KYC

The identity verification process banks and investment platforms require before you can use them.

Liquidity

How quickly you can turn an asset into cash without losing value.

NEFT, RTGS and IMPS

Three bank transfer systems for moving money, differing in speed, timing, and amount limits.

Nominee

The person you name to receive your money in an account or investment if you die.

Recurring deposit

A deposit where you put in a fixed amount every month and earn FD-like interest on it.

Repo rate

The rate at which the RBI lends to banks, which drives your loan and deposit rates.

Savings account

A basic bank account for everyday money that pays a little interest and keeps funds accessible.

Sweep-in FD

A feature that auto-moves extra savings-account cash into an FD for higher interest, while staying accessible.

TDS on FD

Tax the bank deducts on your FD interest once it crosses a yearly threshold.

UPI

India's instant, free system for sending money between bank accounts using a phone.