200 Finance Terms, Explained Simply

The gradual repayment of a loan through regular instalments, each covering both interest and principal. In a home loan amortisation schedule, early EMIs are interest-heavy; later EMIs are principal-heavy. Also refers to the accounting allocation of an intangible asset's cost over its useful life. → EMI Calculator

The total market value of assets that a fund house, AMC or portfolio manager manages on behalf of investors. AUM is a key indicator of the size and scale of a mutual fund house. Higher AUM generally indicates investor confidence. SEBI requires AMCs to disclose AUM monthly.

Tax paid in advance during the financial year rather than at year-end. Applicable to individuals whose tax liability exceeds ₹10,000 in a year (after TDS). Paid in four instalments: 15% by June 15, 45% by Sept 15, 75% by Dec 15, 100% by March 15. Non-payment attracts interest under Sections 234B and 234C. → Income Tax Calculator

The excess return of an investment relative to its benchmark index. A fund with alpha of +2% outperforms its benchmark by 2% on a risk-adjusted basis. Alpha is calculated using the Capital Asset Pricing Model (CAPM). Positive alpha indicates a skilled fund manager; negative alpha indicates underperformance.

The annualised cost of borrowing, including interest and fees, expressed as a percentage. APR is more comprehensive than just the interest rate because it includes processing fees, insurance, and other charges. RBI mandates banks to disclose the Annual Percentage Rate on all loans. → Credit Card Calculator

A measure of a stock's volatility relative to the market (typically Nifty 50). Beta of 1 means the stock moves in line with the market. Beta > 1 means higher volatility (e.g., 1.3 = 30% more volatile than the index). Beta < 1 indicates lower volatility. Relevant when building a portfolio — high beta stocks amplify both gains and losses.

Shares of large, well-established companies with a long track record of stable earnings and dividend payments. In India, Nifty 50 companies like Reliance, TCS, HDFC Bank are considered blue-chips. Generally lower risk than mid/small caps; suitable for conservative long-term investors.

The minimum interest rate set by RBI below which banks cannot lend (replaced by MCLR in 2016, and now primarily by Repo Rate-linked EBLR for retail loans). Banks must publish their base rates. Home loans taken before April 2016 may still be on the base rate system.

A fixed-income debt instrument where the issuer (government or corporate) borrows money from investors for a defined period at a stated interest rate (coupon). At maturity, the principal is repaid. Indian government bonds are called G-Secs; corporate bonds are rated by CRISIL, ICRA, etc. Tax on interest: at slab rate. LTCG on debt MFs: 12.5% (post Budget 2024).

Income earned through illegal means or legal income on which taxes have not been paid to the government. India's Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 imposes 30% tax + 90% penalty on undisclosed foreign assets. Subject to prosecution under IPC and PMLA.

The steady annual growth rate that takes an investment from beginning value to ending value, assuming profits are reinvested. Formula: CAGR = (Ending Value / Beginning Value)^(1/n) - 1, where n = years. CAGR eliminates volatility noise and gives a single representative return figure. Nifty 50's 20-year CAGR is approximately 13–14%. → SIP Calculator

Profit earned from selling a capital asset (shares, mutual funds, property, gold) for more than its purchase price. Divided into Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) based on holding period. Tax rates: STCG on equity = 20%; LTCG on equity above ₹1.25L = 12.5% (post Budget 2024). → Capital Gains Calculator

An evaluation of a borrower's creditworthiness assigned by a rating agency. For individuals: CIBIL score (300–900); above 750 is considered excellent. For corporate bonds: AAA is highest quality, D is default. Indian rating agencies: CRISIL, ICRA, CARE, Brickwork. Higher-rated instruments offer lower returns but lower default risk.

The total annual cost that an employer incurs for an employee, including all salary components, benefits, and employer contributions. CTC ≠ In-hand salary. CTC includes: Basic, HRA, DA, LTA, Food Coupons, Bonus, Employer PF, Gratuity (notional). In-hand = CTC minus employer's contributions minus TDS. → Salary Optimizer

The Central Government's share of GST collected on intra-state (within one state) supply of goods or services. CGST = half of the applicable GST rate on intra-state transactions. For a 18% GST item sold within Maharashtra: CGST = 9%, SGST = 9%. IGST applies to inter-state transactions.

A valuation method that estimates the present value of expected future cash flows, discounted at the company's WACC. Steps: (1) Project free cash flows for 5–10 years; (2) Calculate terminal value; (3) Discount everything back at WACC. DCF is the gold standard for valuing mature businesses with predictable cash flows. Sensitive to discount rate assumptions.

The percentage of gross monthly income that goes toward debt repayments. DTI = Monthly Debt Payments ÷ Gross Monthly Income × 100. Banks typically approve home loans only if DTI ≤ 40–50%. A lower DTI signals better repayment capacity and typically results in better loan terms. → EMI Calculator

A distribution of a portion of a company's earnings to its shareholders, declared by the Board of Directors. Dividend yield = Annual Dividend per Share ÷ Share Price. Tax treatment in India: Dividends are taxable at slab rate in the hands of investors (post-FY2020-21, DDT was abolished). TDS applies at 10% if dividends exceed ₹5,000/year.

An amount subtracted from gross income to arrive at taxable income, thereby reducing tax liability. Key deductions: Section 80C (up to ₹1.5L for ELSS, PPF, LIC, etc.), 80D (health insurance up to ₹25K–₹50K), 80CCD(1B) (additional ₹50K for NPS). Note: Most deductions are available only under the Old Tax Regime. → Income Tax Calculator

A type of equity mutual fund eligible for Section 80C deduction up to ₹1.5 lakh per year, with a mandatory 3-year lock-in (shortest among 80C instruments). Returns are market-linked. LTCG above ₹1.25L is taxable at 12.5%. Suitable for tax-saving investors with a 3–5 year horizon. → SIP Calculator

A fixed monthly payment made by a borrower to a lender on a specified date each calendar month. EMI covers both principal repayment and interest. Calculated using: EMI = P × r × (1+r)ⁿ / [(1+r)ⁿ–1], where P = principal, r = monthly rate, n = months. → EMI Calculator

The annual fee that a mutual fund charges investors, expressed as a percentage of AUM. Includes fund management fees, administration, marketing, and distribution costs. SEBI caps: equity funds at 1.05–2.25% (tiered by AUM); debt at 0.5–2%. Direct plans have lower expense ratios than regular plans. Long-term impact: 1% difference in expense ratio can reduce corpus by 15–20% over 20 years.

An electronic document required for movement of goods worth more than ₹50,000 across state borders (and for intra-state movement exceeding state-specific threshold). Generated on the GST portal (ewaybillgst.gov.in). Must be carried by the transporter. Validity: 1 day per 100 km (up to 200 km/day for over-dimensional cargo).

Foreign entities (mutual funds, pension funds, hedge funds) registered with SEBI to invest in Indian capital markets. Previously called FIIs, now regulated as FPIs (Foreign Portfolio Investors) under SEBI's FPI Regulations 2019. FPI flows are a major driver of Indian equity market sentiment. SEBI tracks daily FPI buy/sell data.

A TDS certificate issued by employers to salaried employees, containing details of salary paid and TDS deducted. Form 16 has two parts: Part A (TDS details from TRACES) and Part B (salary breakup and exemptions). Mandatory for employers who deduct TDS. Key document for filing ITR. Must be issued by June 15 after the financial year.

A savings product where a lump sum is deposited with a bank for a fixed period at a predetermined interest rate. DICGC insurance covers up to ₹5 lakh per bank per depositor. Interest is taxable at slab rate; TDS deducted at 10% if interest exceeds ₹40,000/year (₹50,000 for seniors). 5-year Tax Saver FDs qualify for 80C deduction.

A unique 15-digit alphanumeric identifier assigned to every GST-registered business in India. Format: [2-digit state code] + [10-digit PAN] + [entity number] + [Z] + [check digit]. Required for issuing GST invoices, filing returns, and claiming Input Tax Credit. Mandatory for businesses with turnover above ₹40 lakh (goods) or ₹20 lakh (services).

Mutual funds that invest exclusively in Government Securities (G-Secs) and T-Bills — the safest debt instruments with zero credit risk (sovereign guarantee). NAV moves inversely with interest rates: when RBI cuts rates, gilt fund NAVs rise. Suitable for investors who can handle duration risk but want credit safety. Returns: typically 6–9% over medium term.

An intangible asset representing the premium paid over a company's net asset value in an acquisition. Reflects brand value, customer relationships, proprietary technology, and employee talent. Under Ind AS 36, goodwill is not amortised but tested for impairment annually. Goodwill write-downs can significantly impact reported earnings.

A salary component provided by employers to help employees meet rental expenses. HRA is fully taxable under the New Tax Regime. Under the Old Regime, exemption is the minimum of: (1) Actual HRA received; (2) 50% of salary for metro, 40% for non-metro; (3) Actual rent paid minus 10% of salary. Requires rent receipts and landlord's PAN if rent > ₹1L/year. → Income Tax Calculator

An alternative investment vehicle that uses complex strategies including leverage, short-selling, derivatives, and arbitrage to generate returns irrespective of market direction. In India, regulated as Alternative Investment Funds (AIF) Category III by SEBI. Minimum investment: ₹1 crore. Not available to retail investors.

The mechanism that allows businesses to reduce their GST output liability by the GST already paid on inputs (purchases). Available only to GST-registered businesses for business-use purchases. Must match with supplier's GSTR-1 filing in GSTR-2B. ITC not available on personal expenses, cars (unless used for transport/business), and certain exempt supplies.

The annual form filed with the Income Tax Department disclosing all income, deductions, and tax paid. Deadline: July 31 for individuals (extended to Dec 31 for belated return). 7 ITR forms (ITR-1 to ITR-7) for different taxpayer categories. e-Verification via Aadhaar OTP or bank account is mandatory. Filing is mandatory if income exceeds ₹3L (new regime) or ₹2.5L (old regime). → Income Tax Calculator

A passively managed mutual fund that replicates the composition and returns of a market index (Nifty 50, Sensex, Nifty Next 50). Lower expense ratios than active funds (typically 0.1–0.2%). Evidence shows 80–90% of active large-cap funds underperform their benchmark over 10 years. Ideal for long-term, low-cost equity exposure.

GST charged on inter-state supply of goods or services (between two different states). IGST = CGST + SGST combined rate. Collected by the Central Government and apportioned to the destination state. Also applicable on imports into India. Exporters can claim a refund of IGST paid on exports (zero-rated supply).

Capital gains from assets held beyond the defined long-term holding period. Equity/equity MF: held >12 months. Debt/property: held >24 months. Gold: held >36 months. Post Budget 2024: LTCG on all assets taxed at 12.5% without indexation. Equity LTCG above ₹1.25L/year taxed at 12.5%. → Capital Gains Calculator

The ratio of a loan to the appraised value of the asset being financed. LTV = Loan Amount ÷ Property Value × 100. RBI guidelines: home loans up to ₹30L → max 90% LTV; ₹30L–₹75L → 80%; above ₹75L → 75%. Lower LTV means lower risk for the lender and typically better interest rates for the borrower. → EMI Calculator

A category of debt mutual fund that invests in money market instruments maturing within 91 days. Ideal for parking short-term surplus (emergency fund, 3–6 months expenses). Returns: 6–7% p.a. Redemption processed within T+1 working day (instant redemption up to ₹50,000 or 90% of holdings via some AMCs). Lower risk than equity; no exit load after 7 days.

A pooled investment vehicle that collects money from multiple investors and invests in a diversified portfolio of securities managed by a professional fund manager. Regulated by SEBI. NAV calculated daily. Categories: Equity, Debt, Hybrid, Solution-oriented, Index, ETF. Minimum SIP: ₹100/month. Returns are not guaranteed. → SIP Calculator

The internal benchmark lending rate introduced by RBI in April 2016, replacing the base rate. Loans sanctioned between April 2016 and October 2019 are typically linked to MCLR. Since October 2019, new retail/MSME loans must be linked to external benchmarks (repo rate). MCLR resets monthly to annually depending on the loan.

A provision under Section 115JB that ensures companies pay a minimum tax of 15% on their book profit, even if their regular tax liability (after exemptions) is lower. MAT credit can be carried forward for 15 years and set-off when regular tax exceeds MAT. Designed to prevent companies from using deductions to bring tax liability to zero.

The per-unit value of a mutual fund, calculated daily. NAV = (Total Assets – Total Liabilities) ÷ Number of Units Outstanding. A higher NAV does not mean the fund is more expensive — it simply reflects historical gains. A fund with NAV of ₹500 is not more costly to invest in than a fund with NAV of ₹10.

A government-backed retirement savings scheme regulated by PFRDA. Tax benefits: 80C (up to ₹1.5L), additional 80CCD(1B) (₹50K), and employer contribution up to 10% of salary under 80CCD(2). At 60: minimum 40% of corpus must be used to buy annuity; 60% can be withdrawn tax-free (lumpsum). Equity exposure (E tier): max 75% till 50, then tapers. → Income Tax Calculator

India's benchmark stock market index, tracking 50 large-cap companies listed on the National Stock Exchange (NSE). Free-float market cap-weighted index. Base value: 1000 as of November 3, 1995. Covers 13 sectors. Used as benchmark for most Indian equity mutual funds. 20-year historical CAGR: approximately 13–14%.

The ratio of a stock's current price to its earnings per share (EPS). P/E = Stock Price ÷ EPS. A high P/E indicates the market expects high future growth; a low P/E may indicate undervaluation or declining business. Nifty 50 long-term average P/E: ~20–22x. Sector P/Es vary widely: IT ~30x, Banks ~15x, Utilities ~12x.

A government-backed long-term savings instrument with EEE (Exempt-Exempt-Exempt) tax status — investment (80C), interest, and maturity amount are all tax-free. Current rate: 7.1% p.a. (reviewed quarterly). Lock-in: 15 years (extendable in 5-year blocks). Partial withdrawal from Year 7. Max ₹1.5L/year. Sovereign guarantee. → SIP Calculator

The location that determines whether a transaction is intra-state (CGST+SGST) or inter-state (IGST) for GST purposes. For goods: typically where goods are delivered. For services: varies by service type (location of service recipient for most). Critical for correct GST levy and ITC eligibility.

The rate at which the Reserve Bank of India (RBI) lends short-term funds to commercial banks. It is the primary tool of India's monetary policy. When RBI raises the repo rate, borrowing becomes more expensive, cooling inflation. When cut, it stimulates growth by making loans cheaper. Since October 2019, new retail loans must be benchmarked to the repo rate (EBLR system). Current rate: check RBI website.

See ITR. The annual declaration of income, deductions, and tax paid filed by a taxpayer with the Income Tax Department. Mandatory above basic exemption limits. The process: download Form 26AS + AIS → fill ITR form → compute tax → pay any balance → e-verify. Refunds credited within 20–45 days of e-verification.

A measure of return per unit of risk taken, used to compare investments on an apples-to-apples basis. Sharpe Ratio = (Portfolio Return – Risk-Free Rate) ÷ Standard Deviation. Higher is better. A Sharpe of 1 is good; above 2 is excellent. Risk-free rate in India: 10-year G-Sec yield (~7%). Widely used to rank mutual funds alongside alpha and beta.

An investment method where a fixed amount is invested in a mutual fund at regular intervals (monthly, weekly, daily). Benefits: rupee cost averaging (buys more units when markets fall), compounding over time, disciplined saving. Minimum: ₹100/month. India's SIP inflows reached ₹25,000+ crore/month in 2024-25. → SIP Calculator

Capital gains from assets sold before the long-term holding period. Equity/equity MF: held ≤12 months → taxed at 20% (post Budget 2024). Debt/property: held ≤24 months → taxed at slab rate. STCG cannot be set off against losses from other heads except capital loss. → Capital Gains Calculator

Society for Worldwide Interbank Financial Telecommunication. A global messaging network used by banks and financial institutions to securely transmit information and instructions for international wire transfers. Every bank has a unique SWIFT/BIC code. Required for cross-border transactions alongside IBAN. Processing time: 1–5 business days depending on correspondent banks.

The S&P BSE Sensex — India's oldest and most widely tracked stock market index, comprising 30 of the largest and most actively traded companies on the Bombay Stock Exchange (BSE). Base year: 1978-79; base value: 100. Free-float market cap weighted. Highly correlated with Nifty 50 (correlation ~0.99). Used as a barometer of Indian economic health.

A mechanism under the Income Tax Act where the payer deducts tax before making certain payments (salary, interest, rent, professional fees) and deposits it with the government on behalf of the payee. Rates vary by payment type: 10% on interest/dividends, 1–5% on rent, 10% on professional fees. Reflected in Form 26AS / AIS. TDS is not final tax — it is adjusted against total tax liability when filing ITR.

The actual return on an investment, including both capital appreciation (price gain) and income (dividends or interest). Total Return = (Ending Value – Beginning Value + Dividends) ÷ Beginning Value × 100. Total return index (TRI) is the most accurate benchmark for comparing mutual fund performance — SEBI mandated TRI benchmarking for all mutual funds from 2018.

A document issued by a GST-registered supplier for a taxable supply of goods or services. Must contain: supplier GSTIN, invoice number, date, recipient details, HSN/SAC code, quantity, value, GST rate, tax amount, and place of supply. The recipient needs a valid tax invoice to claim ITC. B2B invoices above ₹5 crore require e-invoicing on the GST portal.

The rate that a company is expected to pay on average to all its security holders to finance its assets. WACC = (E/V × Re) + (D/V × Rd × (1–T)), where E = equity, D = debt, V = total value, Re = cost of equity, Rd = pre-tax cost of debt, T = tax rate. Used as the discount rate in DCF valuation. A higher WACC lowers a company's valuation.

A tax on the net wealth (assets minus liabilities) of individuals and HUFs, abolished in India from FY2015-16 onwards. Previously levied at 1% on net wealth above ₹30 lakh. Replaced with a 2% surcharge on individuals earning above ₹1 crore to compensate for the lost revenue.

The difference between a company's current assets and current liabilities. Working Capital = Current Assets – Current Liabilities. Positive working capital means the company can cover short-term obligations. Negative working capital (common in retail/FMCG) can be efficient if customers pay before suppliers. The Cash Conversion Cycle measures working capital efficiency.

The income return on an investment, expressed as a percentage of the investment's cost or market value. Dividend Yield = Annual Dividend ÷ Stock Price × 100. Rental Yield = Annual Rent ÷ Property Value × 100. Bond Yield = Annual Coupon ÷ Bond Price × 100. India's 10-year government bond yield (~7%) is the risk-free rate benchmark for valuation.

A graph showing bond yields across different maturities at a point in time. A normal (upward-sloping) curve: longer maturity = higher yield. An inverted curve (short > long yields) historically precedes recession. In India, the RBI monitors the yield curve to assess market expectations for monetary policy and economic conditions.

A bond that does not pay periodic interest (coupons) but is issued at a deep discount to its face value and redeemed at face value at maturity. The return is the difference between purchase price and face value. India's government issues Zero Coupon Bonds for specific purposes. Tax: discount is taxed as capital gains (LTCG) or income depending on classification.