Glossary

A

Advance tax: Income tax paid in instalments during the year, instead of in one go at the end, when your tax due exceeds ₹10,000.

B

Basis point: One hundredth of a percentage point (0.01%), the unit used for interest rate changes.
Bear market: A period of falling share prices, often described as a drop of 20% or more from a recent high.
Blue-chip stocks: Shares of large, well-established companies with a long record of stable earnings.
Bond yield: The annual return an investor earns on a bond at its current market price, which moves in the opposite direction to the price.
Bonus shares: Free additional shares given to existing shareholders in proportion to their holding.
Book value: The value of a company's assets minus its liabilities, as shown in its balance sheet; often quoted per share.
Bull market: A period when share prices rise steadily, often described as a gain of 20% or more from a recent low.

C

CAGR: The compound annual growth rate: the steady yearly rate at which an investment would grow from its starting value to its ending value.
Capital gains: The profit made when you sell an asset such as shares, mutual funds, gold or property for more than you paid.
Cash Reserve Ratio (CRR): The share of a bank's deposits that it must keep as cash with the RBI, earning no interest.
Circuit limit: The maximum percentage by which a stock or the market is allowed to rise or fall in a day before trading is restricted.
Compound interest: Interest calculated on both the original amount and the interest already earned.
Consumer Price Index (CPI): The main measure of retail inflation in India, tracking the prices of a basket of goods and services bought by households.
Credit score: A three-digit number, usually from 300 to 900, that shows how reliably you have repaid loans and credit cards.
Current account deficit (CAD): The amount by which a country's imports of goods, services and transfers exceed its exports and income from abroad.

D

Demat account: An electronic account that holds your shares, bonds and other securities.
Deposit insurance (DICGC): Insurance that protects bank deposits up to ₹5 lakh per depositor in each bank if the bank fails.
Direct vs regular plan: Two versions of the same mutual fund: a direct plan is bought straight from the fund house; a regular plan through a distributor who earns commission.
Dividend: A share of a company's profit paid to its shareholders, usually in cash.
Dividend yield: A company's annual dividend per share as a percentage of its current share price.
Double Taxation Avoidance Agreement (DTAA): A tax treaty between India and another country that prevents the same income from being fully taxed in both countries.

E

Earnings per share (EPS): A company's net profit divided by the number of its shares.
EMI: An equated monthly instalment: the fixed monthly payment that repays a loan with interest over its tenure.
Employees’ Provident Fund (EPF): The retirement savings scheme for salaried employees in which both employee and employer contribute a share of salary every month.
Equity-linked savings scheme (ELSS): An equity mutual fund with a three-year lock-in that qualifies for the Section 80C tax deduction under the old regime.
Exchange-traded fund (ETF): A fund that tracks an index or asset like gold and trades on the stock exchange like a share.
Exit load: A fee charged by some mutual funds when you redeem units before a specified period.
Expense ratio: The annual fee a mutual fund charges, as a percentage of your investment, to cover management and running costs.
External Benchmark Lending Rate (EBLR): A loan interest rate linked to an external benchmark, usually the RBI repo rate, plus a fixed spread.

F

Federal Reserve (Fed): The central bank of the United States, whose interest rate decisions affect markets and currencies worldwide, including India.
Fiscal deficit: The gap between what the government spends and what it earns, excluding borrowings, usually shown as a percentage of GDP.
Fixed deposit (FD): A deposit with a bank or NBFC for a fixed period at a fixed interest rate.
Floating interest rate: A loan interest rate that changes over the loan's life in line with a benchmark such as the RBI repo rate.
Foreign exchange reserves: The foreign currency, gold and other reserve assets held by the RBI, used to stabilise the rupee and pay for imports.
Foreign portfolio investor (FPI): A foreign investor, such as a fund or institution, that buys Indian shares and bonds without taking control of companies.
Form 16: The certificate your employer gives you each year showing your salary and the tax deducted from it.
Futures and options (F&O): Derivative contracts whose value depends on an underlying share or index, used to hedge or to speculate.

G

Goods and Services Tax (GST): India's tax on the supply of goods and services, introduced on 1 July 2017 and shared between the Centre and the states.
Grey market premium (GMP): The unofficial premium at which an IPO's shares are traded informally before listing.
Gross Domestic Product (GDP): The total value of all goods and services produced in a country in a given period, the broadest measure of economic size and growth.

H

Health insurance: Insurance that pays for hospital treatment and related medical costs, up to the sum insured.
House rent allowance (HRA): A salary allowance for rent, part or all of which is tax-free under the old regime if you live in rented accommodation.

I

Income tax return (ITR): The form in which you report your income, deductions and taxes paid to the Income Tax Department each year.
Index fund: A mutual fund that copies a market index, such as the Nifty 50, instead of picking stocks.
India VIX: The NSE's volatility index, which measures how much movement traders expect in the Nifty over the next 30 days.
Inflation: The rate at which the general level of prices rises, reducing what each rupee can buy.
Initial public offering (IPO): The first sale of a company's shares to the public, after which the shares are listed on a stock exchange.

K

KYC: Know Your Customer, the process of verifying your identity and address before a bank, broker or fund house can serve you.

L

Liberalised Remittance Scheme (LRS): The RBI scheme that allows resident Indians to send up to US$250,000 abroad each financial year for permitted purposes.
Listing gains: The profit made when an IPO's shares open on the exchange above the issue price.
Loan prepayment: Paying back part or all of a loan before it is due, which reduces the total interest you pay.
Lot size: The minimum number of shares, and multiples of it, that an investor can apply for in an IPO.

M

Marginal Standing Facility (MSF): An emergency RBI window where banks can borrow overnight at a rate above the repo rate when they run short of funds.
Market capitalisation: The total market value of a company's shares: share price multiplied by the number of shares.
MCLR: The Marginal Cost of Funds based Lending Rate, an internal benchmark banks used for loans taken between 2016 and 2019.
Minimum amount due: The smallest payment you must make on a credit card bill by the due date to avoid a late fee.
Monetary Policy Committee (MPC): The six-member RBI committee that decides the repo rate to keep inflation close to the government's target.
Mutual fund: A pooled investment that collects money from many investors and invests it in shares, bonds or other assets, managed by professionals.

N

National Pension System (NPS): A low-cost, market-linked retirement scheme regulated by the PFRDA, open to most Indian citizens.
NEFT, RTGS and IMPS: India's bank-to-bank transfer systems: NEFT for most transfers, RTGS for large amounts and IMPS for instant transfers.
Net asset value (NAV): The price of one unit of a mutual fund, worked out from the value of its holdings at the end of each business day.
Nifty 50: The National Stock Exchange's benchmark index of 50 large Indian companies across sectors.
Nominee: The person you name to receive the money in your bank account, investments or insurance if you die.
Non-performing asset (NPA): A loan on which interest or principal has been overdue for more than 90 days.
NRE account: A rupee bank account for NRIs, funded from income earned abroad, with tax-free interest and full repatriation.
NRI: A Non-Resident Indian: an Indian citizen who lives outside India and is not a resident under tax or foreign exchange rules.
NRO account: A rupee bank account for NRIs to manage income earned in India, such as rent, dividends or pension.

O

Old and new tax regime: India's two income tax systems: the new regime with lower rates and few deductions, and the old regime with higher rates and many deductions.
Open market operations (OMO): The RBI's buying and selling of government securities in the market to add or remove money from the banking system.

P

PAN: Permanent Account Number, the 10-character ID issued by the Income Tax Department to every taxpayer.
Price band: The range of prices within which investors can bid for shares in a book-built IPO.
Price-to-earnings ratio (P/E): A company's share price divided by its earnings per share, showing how much investors pay for each rupee of profit.
Public Provident Fund (PPF): A government-backed 15-year savings scheme with tax-free interest, currently paying 7.1% a year.

R

Recession: A significant decline in economic activity, often described as two consecutive quarters of falling GDP.
Recurring deposit (RD): A bank or post office deposit where you save a fixed amount every month for a fixed period at a fixed rate.
Repo rate: The interest rate at which the Reserve Bank of India lends short-term money to banks against government securities.
Reverse repo rate: The rate at which the RBI borrows money from banks, historically used to absorb surplus cash from the banking system.
Rupee depreciation: A fall in the value of the rupee against other currencies, so that more rupees are needed to buy one dollar.

S

SEBI: The Securities and Exchange Board of India, the regulator of stock markets, mutual funds and investment advisers.
Section 80C: The best-known old-regime tax deduction: up to ₹1.5 lakh a year for PPF, EPF, ELSS, life insurance, tuition fees and similar items.
Section 80D: An old-regime tax deduction for health insurance premiums paid for yourself, your family and your parents.
Sensex: The benchmark index of the BSE, tracking 30 large, actively traded Indian companies.
Standard deduction: A flat deduction from salary or pension income that needs no proof: ₹75,000 under the new regime and ₹50,000 under the old regime.
Standing Deposit Facility (SDF): An RBI window where banks can park surplus funds overnight without giving collateral; its rate is the floor of the policy corridor.
Statutory Liquidity Ratio (SLR): The share of deposits that banks must hold in safe, liquid assets such as government securities, cash and gold.
Stock split: When a company divides each existing share into several shares with a lower face value, without changing the total value.
Sukanya Samriddhi Yojana (SSY): A government savings scheme for a girl child, offering one of the highest small-savings rates with tax-free returns.
Surcharge: An additional tax charged on the income tax of people with taxable income above ₹50 lakh.
Systematic investment plan (SIP): A way of investing a fixed amount in a mutual fund at regular intervals, usually every month.
Systematic transfer plan (STP): A facility to move a fixed amount at regular intervals from one mutual fund to another, usually from a debt fund to an equity fund.
Systematic withdrawal plan (SWP): A facility to withdraw a fixed amount from a mutual fund at regular intervals, often used for monthly income in retirement.

T

Tax deducted at source (TDS): Tax that the payer deducts before paying you, such as your employer on salary or your bank on FD interest, and deposits with the government.
Tax rebate (Section 87A): A rebate that cancels income tax for resident individuals whose taxable income is below a limit: ₹12 lakh under the new regime and ₹5 lakh under the old.
Tax year and assessment year: The year whose income is taxed. Under the Income-tax Act, 2025, the old pair of "previous year" and "assessment year" is replaced by a single "tax year".
Term insurance: Pure life insurance that pays a fixed sum to your family if you die during the policy term, with no maturity benefit.

U

Union Budget: The central government's annual statement of income and spending, presented to Parliament on 1 February.
UPI: Unified Payments Interface, India's real-time system for sending money instantly between bank accounts using a mobile app.

W

Wholesale Price Index (WPI): An index of price changes for goods traded in bulk, such as raw materials, fuel and manufactured products.

X

XIRR: The annualised return on investments made at different times, such as SIP instalments.