Glossary

Goods and Services Tax is an indirect tax levied on the supply of goods and services across India, replacing multiple cascading taxes. Rates range from 0% to 28% depending on the category.

Equated Monthly Installment is a fixed payment amount made by a borrower to a lender on a specified date each month. EMI includes both principal and interest components.

Systematic Investment Plan allows investors to invest a fixed amount in mutual funds at regular intervals, typically monthly. It leverages rupee cost averaging for long-term wealth creation.

Public Provident Fund is a long-term savings scheme backed by the Government of India offering guaranteed returns and tax benefits under Section 80C. Current interest rate is 8.2% per annum.

National Pension System is a government-sponsored pension scheme that allows subscribers to build a retirement corpus through equity and debt investments, with partial tax benefits under Section 80CCD.

House Rent Allowance is a component of salary that provides tax exemption under Section 13A for salaried employees who pay rent. Exemption is the minimum of HRA received, actual rent minus 10% of basic salary, or 50%/40% of basic salary for metro/non-metro cities.

Permanent Account Number is a 10-character alphanumeric identifier issued by the Income Tax Department to individuals and entities for tracking financial transactions and ensuring tax compliance.

A 12-digit unique identity number issued by UIDAI to residents of India. It serves as proof of identity and address and is linked to various financial services and government schemes.

Indian Financial System Code is an 11-character alphanumeric code that uniquely identifies a bank branch participating in the NEFT, RTGS, and IMPS payment systems in India.

Unified Payments Interface is a real-time payment system developed by NPCI that enables instant fund transfers between bank accounts through a mobile app, supporting interoperable QR codes.

Real Time Gross Settlement is an electronic funds transfer system where transaction processing and settlement happen in real-time on an individual basis, primarily used for high-value transactions above Rs 2 lakh.

National Electronic Funds Transfer is a nation-wide payment system that enables individuals to electronically transfer funds from any bank branch to any other bank branch in India on an hourly batch settlement basis.

Immediate Payment Service is an instant interbank electronic funds transfer service in India that operates 24x7, including weekends and holidays, with settlement happening within seconds.

Compound Annual Growth Rate measures the mean annual growth rate of an investment over a specified period longer than one year, accounting for compounding effects.

Return on Investment is a performance measure used to evaluate the efficiency of an investment, calculated as the ratio of net profit to the cost of investment expressed as a percentage.

Loan-to-Value ratio represents the ratio of a loan to the value of the asset purchased. RBI guidelines mandate maximum LTV of 80-90% for home loans depending on the property value.

Credit Information Bureau India Limited is the first credit information company in India that collects and maintains credit records of individuals and provides credit scores used by lenders to assess creditworthiness.

A three-digit numerical summary of a persons credit history derived from CIBIL, Experian, Equifax, or CRIF High Mark records. Scores range from 300 to 900, with 750+ considered excellent for loan approvals.

A plastic card linked directly to a bank account that allows cardholders to make purchases and withdraw cash, with transactions debited immediately from the linked account.

A payment card that allows the cardholder to borrow funds to make purchases, with the amount borrowed to be repaid with interest by a specified due date if full payment is not made.

A stored-value card preloaded with a specific amount of money that can be used at participating merchants until the balance is exhausted. It does not require a bank account.

A financial institution owned and controlled by its members, offering banking services like deposits and loans. Urban co-operative banks are regulated by RBI while primary agricultural credit societies come under state supervision.

Non-Banking Financial Company is a company registered under the Companies Act that provides financial services like loans, advances, and investment but does not hold a banking license. RBI regulates systemically important NBFCs.

Micro Finance Institution provides small loans and other financial services to low-income individuals or groups who lack access to traditional banking. MFIs play a significant role in financial inclusion in rural India.

Life Insurance Corporation of India is the largest insurance company in India offering life insurance products including term plans, endowment policies, ULIPs, and pension plans.

A pure life insurance product that provides coverage for a specified period. If the policyholder dies within the term, the nominee receives the sum assured. It offers the highest coverage at the lowest premium.

Insurance coverage that pays for medical and surgical expenses incurred by the insured. Policies may reimburse expenses or pay the hospital directly. Critical illness riders and cashless claims are common features.

Vehicle insurance that covers loss or damage to motorcycles, cars, and other vehicles. It includes third-party liability coverage mandated by law and own-damage coverage for accidents, theft, and natural disasters.

Unit Linked Insurance Plan combines life insurance protection with market-linked investment in equity or debt funds. Premium payments are split between insurance cover and investment units.

Equity Linked Savings Scheme is a diversified equity mutual fund that offers tax benefits under Section 80C with a mandatory lock-in period of 3 years. It is the only equity product qualifying for 80C deduction.

A single, one-time investment made in a financial instrument such as a mutual fund, fixed deposit, or stock, as opposed to making periodic investments over time through SIPs.

Systematic Withdrawal Plan allows investors to withdraw a fixed amount from their mutual fund investment at regular intervals, providing regular income while keeping the remaining investment invested.

The process of converting physical share certificates into electronic form held in a Demat account. SEBI mandated dematerialization for all listed securities to streamline trading and reduce fraud.

An electronic account that holds securities in dematerialized form, similar to a bank account holding money. It is required to trade and invest in the Indian stock markets through NSE and BSE.

An account used to buy and sell securities such as stocks, bonds, and derivatives on stock exchanges. It is linked to a Demat account for settlement of trades.

The fee charged by a brokerage firm for executing buy and sell orders on behalf of an investor. It may be a fixed amount per trade or a percentage of the trade value.

Securities and Exchange Board of India is the regulator for the securities market in India, overseeing stock exchanges, brokers, mutual funds, and investor protection activities.

Reserve Bank of India is the central bank of India that regulates the monetary policy, manages foreign exchange, issues currency notes, and oversees the banking and non-banking financial companies.

Insurance Regulatory and Development Authority of India is the regulator for the insurance industry in India, overseeing life insurance, general insurance, and health insurance companies.

Foreign Exchange Management Act governs foreign exchange transactions in India, controlling the inflow and outflow of currency to maintain stable exchange rates and prevent illegal transfers.

Section 80C of the Income Tax Act allows deduction of up to Rs 1.5 lakh per year from taxable income for investments in PPF, NSC, ELSS, life insurance premiums, EPF, and other specified instruments.

Section 80D provides tax deductions for health insurance premiums paid for self, spouse, children, and parents. Deduction limits range from Rs 25,000 to Rs 1 lakh depending on age and coverage.

Section 87A provides a tax rebate of up to Rs 12,500 for individual taxpayers with total income up to Rs 7 lakh under the new tax regime, effectively reducing tax liability for middle-income groups.

A TDS certificate issued by an employer showing the employees salary, deductions under various sections, and the tax deducted and deposited with the government. It is essential for filing ITR.

Income Tax Return is a form filed with the Income Tax Department reporting income, deductions, and tax liability. Different ITR forms (ITR-1 to ITR-7) are used based on the income sources.

Tax Deducted at Source is the mechanism where the payer deducts a percentage of tax before making payments such as salary, rent, interest, or professional fees, with the deducted amount remitted to the government.

Tax payable in installments during the financial year rather than as a lump sum at year-end. It is applicable when estimated tax liability exceeds Rs 10,000 and includes components like self-assessment tax.

The remaining tax liability after accounting for TDS, advance tax, and existing tax credits. It must be paid before filing ITR using Challan 280 and includes interest under Sections 234B and 234C.

Profit earned from the sale of capital assets such as stocks, property, or mutual funds. Short-term gains are taxed at slab rates while long-term gains on listed securities attract 20% tax with indexation benefits.

Gains from selling assets held for less than 36 months (12 months for listed equity). STCG on equity funds is taxed at 15% while for other assets it is added to regular income and taxed at slab rates.

Gains from selling assets held for more than 36 months (12 months for listed equity). LTCG on listed equity shares and equity-oriented mutual funds is taxed at 20% with indexation benefit for other assets.

The process of adjusting the purchase price of an asset for inflation using the Cost Inflation Index, thereby reducing the taxable capital gains. Available only for long-term capital gains on non-equity assets.

A figure notified by the CBDT annually to measure inflation. It is used to index the cost of acquisition of assets to compute inflation-adjusted cost for calculating long-term capital gains.

A zero-balance savings bank account offered by all banks under RBI guidelines, providing basic deposit facilities, ATM/debit card, and access to government schemes like Jan Dhan and direct benefit transfers.

Pradhan Mantri Jan Dhan Yojana is a financial inclusion program offering a zero-balance basic savings bank account with a RuPay debit card, overdraft facility up to Rs 10,000, and accidental insurance coverage.

State Bank Yono is a comprehensive digital banking platform by SBI offering account management, payments, investments, loans, and insurance through a unified app and web interface.

Internet banking service provided by banks allowing customers to perform financial transactions online including fund transfers, bill payments, account statements, and investment management.

Banking services accessed through a mobile application, allowing users to check balances, transfer funds, pay bills, and manage accounts on smartphones and tablets.

A unique virtual payment address linked to a bank account for receiving UPI payments, format typically like name@bankname. It eliminates the need to share bank account details for receiving transfers.

Bharat Interface for Money is a UPI-enabled mobile app developed by NPCI to enable fast and secure digital payments. It supports instant fund transfers, QR code payments, and bill splitting.

A reloadable sticker with an embedded chip and RFID technology affixed to vehicle windscreens, enabling automatic toll fee deduction via UPI or linked bank account without stopping at toll plazas.

An Indian domestic card payment network operated by NPCI that offers debit, credit, and prepaid cards accepted at ATMs, POS terminals, and online merchants across India and internationally.

A global payments technology company operating a worldwide network for authorizing and settling transactions between merchants, financial institutions, and cardholders using Visa-branded credit and debit cards.

A global payments technology corporation that facilitates electronic transfer services worldwide, issuing credit and debit cards through member financial institutions with widespread merchant acceptance.

A globally accepted credit card network and payments company offering premium charge cards and credit cards with high reward rates, airport lounge access, and concierge services in India.

A savings bank account that does not require maintaining a minimum balance. These accounts, including Jan Dhan accounts and basic savings accounts, provide financial inclusion for underbanked populations.

A credit facility sanctioned by a bank allowing account holders to withdraw money beyond the available balance, up to an agreed limit. Interest is charged only on the amount utilized.

A type of working capital loan where a borrower can withdraw funds up to a sanctioned limit against hypothecation of inventory or receivables. Interest accrues only on the amount withdrawn.

Short-term loan to finance day-to-day operational expenses such as purchasing inventory, paying suppliers, and managing receivables. It bridges the gap between revenue and expenses.

A permit issued by local municipal authorities allowing individuals or companies to conduct specific trade or business in a designated area. It is mandatory for operating any commercial enterprise.

Goods and Services Tax Identification Number is a 15-digit unique identification number assigned to every GST-registered business in India. It is mandatory for businesses with turnover exceeding Rs 40 lakh.

The official government website (gst.gov.in) for all GST-related activities including registration, return filing (GSTR-1, GSTR-3B, GSTR-9), tax payment, and compliance management.

The official e-filing portal (incometax.gov.in) operated by the Income Tax Department for filing ITR online, submitting Form 16, tracking refunds, and managing income tax compliance.

A consolidated tax statement showing TDS, TCS, and advance tax paid against the PAN. It is available on the Income Tax e-filing portal and is essential for verifying tax credits before filing ITR.

Annual Information Statement is a comprehensive view of financial transactions including interest, dividends, securities, and foreign exchange information maintained by the Income Tax Department for each PAN.

Tax Information Statement provides a detailed summary of all tax-related information submitted by deductors and collectors, forming part of the AIS for reconciliation during ITR filing.

Know Your Customer is the process of verifying the identity of customers through documents like Aadhaar, PAN, and address proof as mandated by RBI and other regulators to prevent money laundering and fraud.

A remote verification process using live video streaming to complete KYC compliance without visiting a bank branch. RBI approved video KYC for opening bank accounts and certain financial services.

Fixed Deposit is a savings instrument that locks money for a fixed tenure at a predetermined interest rate. FDs offer higher rates than regular savings accounts and are insured by DICGC up to Rs 5 lakh.

Recurring Deposit is a savings instrument requiring fixed monthly deposits over a specified tenure, earning a predetermined interest rate. It is suitable for building a corpus through regular savings.

Pradhan Mantri Mudra Yojana provides loans up to Rs 10 lakh to non-corporate, non-farm small and micro enterprises. Loans are categorized as Shishu, Kishore, and Tarun based on the business stage.

Loans extended to Micro, Small, and Medium Enterprises under the MSMED Act, 2006. Banks and NBFCs offer collateral-free loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises.

Government-backed loan schemes including PM Mudra Yojana, PM SVANidhi for street vendors, and PM Employment Generation Programme that provide subsidized credit to underserved borrower segments.

Sukanya Samriddhi Yojana is a government-backed savings scheme for the girl child offering high interest rates and tax benefits under Section 80C, with deposits made by parents or guardians until the girl turns 10.

A calculator for estimating returns on Senior Citizen Savings Scheme deposits, which offer guaranteed interest rates higher than regular FDs, with quarterly interest payments and tax benefits.

A lump-sum payment made by an employer to an employee as gratitude for at least five years of service, governed by the Payment of Gratuity Act. It is partially tax-exempt under Section 10(10).

The monetary equivalent of unused earned leave that employees can encash, typically upon retirement or resignation. It is taxable as salary income under Section 17 of the Income Tax Act.

A financial arrangement where a third party holds funds or assets on behalf of two transacting parties until specified conditions are met. Commonly used in real estate and high-value transactions.

An asset pledged as security for a loan that the lender can seize if the borrower defaults. Common collateral includes property, gold, fixed deposits, and marketable securities.

A legal arrangement where the borrower retains possession of movable property (like vehicles or inventory) while using it as security for a loan. The lender has a charge on the asset.

The process of spreading loan payments over time, with each installment covering interest and reducing the principal balance. An amortization schedule shows the breakdown of each payment.

Replacing an existing loan with a new one, typically to obtain a lower interest rate, change the loan tenure, or switch from a floating to a fixed rate. Common for home loans and personal loans.

Moving an existing loan from one lender to another, typically to avail of lower interest rates or better terms. Most banks offer balance transfer with top-up loans at concessional rates.

An additional loan amount sanctioned over and above an existing loan, using the same property or asset as security. Common with home loans and personal loans where the borrower has good repayment history.

DLR is the minimum interest rate below which banks cannot lend to any customer, set by the banks board. It replaced the Base Rate system and is now replaced by MCLR for transparency.

Marginal Cost of Funds based Lending Rate is the internal benchmark rate used by banks to determine interest rates on loans. It is revised monthly and ensures lending rates reflect current market conditions.

The rate at which RBI lends short-term funds to commercial banks by purchasing securities under repurchase agreements. Changes in repo rate directly impact lending and deposit rates in the economy.

The rate at which RBI borrows money from banks by selling securities with an agreement to repurchase them later. Banks earn interest on surplus funds parked with RBI.

Cash Reserve Ratio is the percentage of total deposits that banks must maintain as cash reserves with RBI without earning any interest. RBI adjusts CRR to manage liquidity and inflation.

Statutory Liquidity Ratio is the percentage of total deposits that banks must maintain in liquid assets like government securities, cash, and gold. It ensures banks have sufficient reserves for stability.

The Reserve Bank of Indias Central Bank Digital Currency (CBDC) issued in digital form as a liability of the central bank. The e₹ is available in wholesale and retail variants for interbank and general use.

A digital representation of value that can be traded virtually and used for payments. Unlike fiat currency, it is not issued by any government or central bank, and its legal status in India is governed by RBI guidelines.

A decentralized digital currency using cryptography for security and operates on distributed ledger technology. In India, RBI banned crypto transactions in 2018 though the Supreme Court lifted the ban in 2020.

A distributed ledger technology that records transactions across multiple computers in a way that makes them immutable and transparent. It forms the backbone of cryptocurrencies and has applications in finance, supply chain, and governance.

Decentralized Finance refers to financial services built on blockchain networks that operate without traditional intermediaries like banks, using smart contracts to enable lending, borrowing, and trading.

Digital-only banks operating without physical branches, offering services through mobile apps and web platforms with faster account opening, lower fees, and better user experience than traditional banks.

A system where banks share customer data with third-party financial service providers through secure APIs, enabling better financial management tools, comparison services, and personalized products.

Peer-to-Peer lending platforms connect borrowers directly with individual lenders, bypassing traditional financial institutions. RBI regulates P2P platforms as NBFC-P2P with strict capital and operational requirements.

The process of identifying and attracting potential customers for financial products through digital channels. Fintech platforms use data analytics and targeted marketing to match borrowers with suitable lenders.

Companies that collect and maintain credit information on individuals and businesses from banks, NBFCs, and other lenders. In India, four SEBI-registered bureaus operate: CIBIL, Experian, Equifax, and CRIF High Mark.

A detailed statement showing an individuals credit history including loan repayment records, credit card usage, outstanding debts, and credit inquiries. It is used by lenders to assess creditworthiness.

A record created when a lender checks an individuals credit report to evaluate loan or credit card applications. Multiple hard inquiries within a short period can temporarily lower credit scores.

The percentage of available credit limit being used on credit cards. Credit bureaus recommend keeping the utilization ratio below 30% to maintain a healthy credit score and improve loan approval chances.

A credit inquiry made by a lender when evaluating a loan or credit card application. It temporarily lowers the credit score by a few points and remains on the credit report for up to 2 years.

A credit inquiry that does not affect the credit score and occurs when checking your own credit report, pre-approved offers, or background checks by employers. It is recorded but has no scoring impact.

The maximum amount a credit card company or lender will extend to a cardholder. It is determined based on income, credit score, and repayment history. Exceeding the limit incurs penalty fees.

The smallest amount a cardholder must pay by the payment due date to keep the account in good standing. Paying only the minimum due leads to interest accumulation on the remaining outstanding balance.

Withdrawing cash from a credit card at ATMs, usually at a high fee and immediate interest accrual without any interest-free period. Cash advances are expensive and should be avoided.

Points earned on credit card spending that can be redeemed for gifts, travel, cashback, or statement credits. Different card categories earn varying points per Rs 100 spent.

A reversal of a credit card transaction where the cardholder disputes a charge with the issuing bank and requests a refund. Common in cases of unauthorized transactions or non-delivery of goods.

A prepaid travel card loaded with foreign currency for use abroad. It offers competitive exchange rates, safety against theft, and avoids foreign transaction fees compared to regular debit or credit cards.

Transfer of funds from a foreign country to India, commonly received by NRIs or individuals from overseas family members. Inward remittances are governed by FEMA and LRS guidelines.

Transfer of funds from India to a foreign country, governed by FEMA guidelines and the Liberalised Remittance Scheme. Banks and authorized dealers must ensure compliance with KYC and reporting requirements.

Liberalised Remittance Scheme allows resident individuals to remit up to USD 2,50,000 per financial year for permitted current and capital account transactions without RBI approval, covering education, travel, and investment abroad.

Bank accounts operated by Non-Resident Indians including NRE (Non-Resident External) for repatriable funds, NRO (Non-Resident Ordinary) for local income, and FCNR (Foreign Currency Non-Resident) for foreign currency deposits.

Non-Resident External account is an Indian bank account for NRIs to deposit repatriable earnings in rupees. Interest earned is tax-free and the entire balance can be freely transferred abroad.

Non-Resident Ordinary account is used by NRIs to manage income earned in India such as rent, dividends, or pension. Repatriation of funds is restricted and subject to tax deducted at source.

Foreign Currency Non-Resident account allows NRIs to hold deposits in foreign currencies like USD, GBP, and EUR, protecting against exchange rate fluctuations while earning market-linked returns.

The process of transferring funds from India to a foreign country. NRE account balances are freely repatriable while NRO account repatriation is restricted to USD 1 million per financial year with tax implications.

Employees Provident Fund is a mandatory savings scheme for salaried employees where both employer and employee contribute 12% of basic salary. The accumulated corpus earns interest and is tax-exempt on withdrawal after retirement.

Voluntary Provident Fund allows employees to contribute more than the mandatory 12% of basic salary to their EPF account. Contributions beyond the employer match earn market-linked returns with EPF tax benefits.

Employees Pension Scheme provides pension benefits to employees after retirement or in case of disability or death. The employer contribution to EPF includes 8.33% directed towards EPS, subject to a salary ceiling of Rs 15,000.

Regular payments made to a person after retirement in exchange for contributions made during employment. In India, pension schemes include EPS, NPS, and Atal Pension Yojana for different segments.

A financial product that provides regular payments in exchange for a lump sum investment, commonly used for retirement income. Annuity plans are offered by insurance companies with options for lifetime or fixed-term payments.

An online tool to estimate the gratuity amount an employee will receive based on years of service and last drawn salary, as per the Payment of Gratuity Act. Gratuity = (Last drawn salary × 15 days × Years of service).

The total accumulated savings and investments required to maintain the desired lifestyle after retirement. It is calculated based on current expenses, inflation, life expectancy, and expected returns.

The state of having sufficient personal wealth to cover living expenses without actively working. It is achieved by building a diversified portfolio through systematic investments over the working years.

Financial Independence, Retire Early is a movement advocating aggressive savings and investment to achieve financial independence and optional early retirement, typically requiring 25× annual expenses as corpus.

A savings reserve equal to 3-6 months of living expenses kept in liquid instruments like savings accounts or liquid funds for unexpected expenses like medical emergencies or job loss.

The total value of all assets (cash, investments, property, vehicles) minus all liabilities (loans, credit card balances). It is a key metric for tracking overall financial health and progress.

Financial obligations or debts owed to others, including home loans, personal loans, car loans, credit card outstanding, and any other borrowed funds. Managing liabilities is crucial for improving net worth.

The strategy of dividing investments across different asset classes like equity, debt, gold, and real estate based on risk tolerance, time horizon, and financial goals to optimize returns and manage risk.

The practice of spreading investments across multiple asset classes, sectors, and geographies to reduce risk. Diversified portfolios help mitigate the impact of poor performance in any single investment.

The process of realigning the portfolio back to the target asset allocation by selling over-performing and buying under-performing assets periodically, typically annually or when allocation drifts beyond thresholds.

The degree of variability in investment returns that an investor is willing to withstand. It is determined by factors including age, income stability, financial goals, and comfort level with market volatility.

SIP (Systematic Investment Plan) involves regularly investing a fixed amount in mutual funds to build wealth over time. SWP (Systematic Withdrawal Plan) involves regularly withdrawing from accumulated investments to generate regular income.

A debt mutual fund that invests in securities with a maturity of up to 91 days, offering high liquidity and safety with returns slightly higher than savings accounts. Ideal for parking surplus funds.

Mutual funds that invest primarily in fixed-income securities like bonds, debentures, and government securities. They offer stable but typically lower returns than equity funds, suitable for conservative investors.

Mutual funds that invest primarily in stocks and equity-related securities of companies. They offer higher growth potential but with higher volatility than debt funds, suitable for long-term investors.

Mutual funds that invest in a mix of equity and debt instruments, combining growth potential with stability. Balanced funds and aggressive hybrid funds are common variants.

A passively managed mutual fund that replicates a market index like Nifty 50 or Sensex, offering broad market exposure with very low expense ratios compared to actively managed funds.

Exchange Traded Fund is a basket of securities that trades on stock exchanges like individual stocks, offering index tracking, gold investment, and sectoral exposure with real-time pricing throughout the trading day.

Exchange Traded Fund that invests in physical gold and trades on stock exchanges. It offers a convenient way to invest in gold without physical storage concerns, with prices linked to international gold rates.

Government securities denominated in grams of gold, offering an annual interest rate of 2.5% plus capital appreciation linked to gold prices, with a lock-in of 5 years and tax benefits on redemption.

A record of all capital asset sales during a financial year showing gains or losses, holding periods, and applicable tax rates. It must be reported in ITR Schedule-SHP for stocks and mutual funds.

Loss incurred when a capital asset is sold for less than its purchase price. Capital losses can be set off against capital gains to reduce taxable gains, with rules governing short-term and long-term loss offsetting.