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Money glossary

The terms you meet in bank letters, fund factsheets and tax forms, each in one line.

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AMC: Asset management company; the firm that runs a mutual fund.
Amortisation: The schedule showing how each EMI splits between interest and principal.
Annuity: A product that converts a lump sum into regular income for a period or for life.
Asset allocation: How your money is divided between equity, debt, gold and cash.
Basis point: One hundredth of a percentage point; 25 basis points is 0.25%.
CAGR: Compound annual growth rate; the steady yearly rate linking a start and end value.
Capital gain: Profit from selling an asset for more than you paid.
Cess: A tax on tax; the health and education cess adds 4% to income tax.
Credit utilisation: The share of your credit card limit that you are using.
Debt fund: A mutual fund that invests in bonds and money-market instruments.
Demat account: An account that holds shares and other securities in electronic form.
DICGC: The RBI subsidiary that insures bank deposits up to ₹5 lakh per depositor per bank.
Direct plan: The version of a mutual fund bought without a distributor, with a lower expense ratio.
ELSS: Equity-linked savings scheme; an equity fund with a three-year lock-in and an old-regime tax deduction.
EMI: Equated monthly instalment; the fixed monthly loan repayment.
EPF: Employees’ Provident Fund; the retirement account funded by employee and employer.
Expense ratio: The yearly fee a fund charges, as a percentage of your investment.
Exit load: A fee charged if you redeem fund units before a set period.
Floating rate: An interest rate that changes with a benchmark such as the repo rate.
GST: Goods and services tax; India’s tax on the supply of goods and services.
HRA: House rent allowance; a salary component partly exempt for renters under the old regime.
Index fund: A fund that copies a market index rather than picking stocks.
Inflation: The rate at which prices rise and money loses buying power.
KYC: Know your customer; the identity check required before investing or opening accounts.
Liquid fund: A debt fund holding very short-term instruments, used for parking cash.
LTCG: Long-term capital gain; profit on an asset held beyond its qualifying period.
Mid-market rate: The midpoint between buying and selling prices of a currency.
NAV: Net asset value; the price of one unit of a mutual fund.
NPS: National Pension System; a market-linked retirement scheme regulated by PFRDA.
NRE / NRO: Rupee accounts for non-residents: NRE for foreign earnings, NRO for Indian income.
PPF: Public Provident Fund; a 15-year government savings scheme with tax-free interest.
Principal: The amount borrowed or invested, before interest or returns.
Rebate: A reduction in tax payable for incomes below a set limit.
Repo rate: The rate at which the RBI lends to banks; it steers loan and deposit rates.
SIP: Systematic investment plan; a fixed monthly investment into a fund.
Standard deduction: A flat amount salaried people subtract from income without proof.
STCG: Short-term capital gain; profit on an asset sold within its qualifying period.
Surcharge: Extra tax on the tax of people with income above ₹50 lakh.
SWP: Systematic withdrawal plan; a fixed regular withdrawal from a fund.
TDS: Tax deducted at source by the payer, such as an employer or bank.
Term insurance: Life cover that pays only on death during the policy term, with no maturity value.
UPI: Unified Payments Interface; the instant bank-to-bank payment system run by NPCI.
XIRR: The annualised return on a series of cash flows at irregular dates, used for SIPs.