Glossary
Indian personal-finance terms, defined
44 commonly-misunderstood terms — what they mean, why they matter, which calculator they apply to. Plain English, no jargon.
A
C
- CAGRThe smoothed annual growth rate of an investment over a period — the right metric for single-buy, single-sell investments.
- CessA 4% surcharge applied on top of income tax to fund health and education programs. Levied on every taxpayer above the basic exemption.
- CompoundingEarning returns on previously earned returns. The exponential force behind every long-term wealth plan.
E
- Expense ratioThe annual fee a mutual fund charges, expressed as a percentage of your invested amount. Compounds against you.
- Exit loadA small fee charged for redeeming mutual fund units within a short holding period — usually 1% if redeemed within 1 year.
- ELSSEquity tax-saver mutual fund — 80C deduction up to ₹1.5L (Old Regime) and a 3-year lock-in, the shortest among 80C options.
- EPFSalaried-employee retirement scheme — 12% of basic deducted, matched by employer; ~8% tax-free return.
- EMIEquated Monthly Instalment — the fixed monthly amount you pay to repay a loan, computed on a reducing-balance basis.
F
- FOIRShare of your net monthly income used to service all EMIs. Banks typically cap home loan eligibility at 40–55% FOIR.
- FIREFinancial Independence, Retire Early — a movement built around saving aggressively to retire decades before 60.
- Financial Year (FY)1 April to 31 March in India. FY 2025-26 means 1 April 2025 to 31 March 2026.
H
I
- IndexationTax-saving adjustment that inflates the purchase cost of an asset before computing capital gains — largely removed for debt funds.
- IDCWMutual fund option that periodically pays out a portion of the corpus to investors — the renamed 'Dividend' option.
- InflationRise in the general price level. India headline CPI ~6%; medical inflation 12–14%. Erodes real returns.
- ITRThe annual income tax return filed with the Income Tax Department. Due 31 July for non-audit individuals.
K
L
N
- NAVThe per-unit market value of a mutual fund — calculated once at the end of every business day.
- NPSGovernment-backed retirement scheme with equity exposure and an extra ₹50,000 deduction under 80CCD(1B).
- NSC5-year Post Office savings instrument with annual compounding — currently 7.7%, 80C eligible, fully taxable at maturity.
P
R
S
- STCGTax on gains from assets held short term. For Indian equity: 20% on holdings under 12 months.
- STTA small tax automatically charged on every buy and sell of listed equity, equity mutual funds, and F&O contracts.
- Section 80COld Regime deduction of up to ₹1.5 lakh/year for specified savings — PPF, ELSS, EPF, life insurance, home loan principal.
- Section 80DOld Regime deduction for health insurance premiums — ₹25,000 for self+family, ₹50,000 if parents are seniors.
- Section 87ATax rebate that makes income tax zero for low-mid earners. FY 2025-26 New Regime: full rebate up to ₹12 lakh taxable.
- SurchargeAn extra tax above ₹50 lakh income — 10% above ₹50L, 15% above ₹1Cr, 25% above ₹2Cr (Old Regime can go to 37%).
- SIPInvesting a fixed amount in a mutual fund every month — the standard way salaried Indians build wealth.
- SWPReverse of a SIP — fixed monthly withdrawals from a mutual fund corpus, ideal for retirement income.
- STPMoving a fixed amount from one mutual fund to another every month — typically debt → equity to stagger market entry.
- Sukanya Samriddhi YojanaGovernment scheme for parents of girl children — currently 8.2% tax-free, matures at the daughter's 21st birthday.
- SCSSGovernment scheme for those above 60 — currently 8.2%, quarterly interest payouts, 5-year tenure.
- Safe withdrawal rateThe maximum % of a retirement corpus you can withdraw each year without running out — 4% in the US, 3–3.5% safer for India.
- Sequence-of-returns riskThe risk that the order of investment returns — particularly poor returns early in retirement — destroys a portfolio that would otherwise have lasted.