Financial Terms Glossary

CAGR is the average annual rate at which an investment grew over a period, assuming the growth was reinvested each year. For example, if ₹1 lakh grew to ₹2 lakh in 6 years, the CAGR is approximately 12.2%. It is a smoother measure than absolute returns and is used to compare mutual funds and investments over different time periods.

Your CIBIL score (also called a credit score) is a 3-digit number between 300 and 900 that represents your creditworthiness, based on your past loan repayment history, credit card usage, and debt levels. A score above 750 is considered good and qualifies you for loans at the best interest rates. Below 650 makes it difficult to get a loan at all. Maintained by TransUnion CIBIL, it is checked by all lenders before approving any loan or credit card.

CTC is the total annual cost your employer bears to employ you. It includes your gross salary (basic + allowances) plus employer's contributions to PF, gratuity provision, and any other benefits. CTC is always higher than what you actually receive — your in-hand (take-home) salary is typically 75–85% of CTC. Use our Salary Calculator to find your exact take-home from your CTC.

A numerical summary of your credit history, typically ranging from 300 to 900. In India, the most common scoring models are from CIBIL, CRIF High Mark, Equifax, and Experian. Lenders use your credit score to decide whether to approve a loan and at what interest rate. You can check your credit score for free once a year from each bureau's website. Maintaining a score above 750 is essential for borrowing at competitive rates.

An EMI is the fixed monthly payment you make to repay a loan — it covers both the principal (the amount borrowed) and the interest. Indian banks use the reducing-balance method: in early months, most of the EMI goes to interest; in later months, more goes towards principal. The EMI formula is: EMI = P × r × (1+r)^n ÷ [(1+r)^n − 1], where P is principal, r is monthly interest rate, and n is tenure in months. Use our Home Loan EMI Calculator or Car Loan Calculator to calculate yours.

ELSS is a type of mutual fund that invests primarily in equities and qualifies for a tax deduction of up to ₹1.5 lakh per year under Section 80C of the Income Tax Act. It has the shortest lock-in period among all 80C instruments — just 3 years. ELSS typically delivers higher long-term returns than PPF or FDs, making it the most efficient tax-saving option for investors with a medium to long-term horizon.

EPF is a mandatory savings scheme for salaried employees governed by EPFO (Employees' Provident Fund Organisation). Both the employee and employer contribute 12% of the employee's basic salary each month. The corpus earns a fixed interest rate declared by the government annually (currently around 8.25%). The full amount (employee + employer share + interest) is payable on retirement, resignation, or after a certain period of unemployment. EPF contributions also qualify for 80C deduction under the old tax regime.

A Fixed Deposit is a savings instrument where you deposit a lump sum with a bank or post office for a fixed period at a pre-agreed interest rate. The returns are guaranteed regardless of market conditions. Banks typically offer quarterly compounding, which gives slightly better returns than annual compounding. FD interest is fully taxable as per your income slab rate, and TDS is deducted if interest exceeds ₹40,000/year. Calculate FD maturity with our FD Calculator.

A floating interest rate on a loan changes over time, linked to an external benchmark such as the RBI's repo rate. When the RBI cuts rates, your floating-rate loan EMI or tenure reduces; when it hikes rates, your cost increases. Most home loans in India are on floating rates. Floating rates are typically lower than fixed rates at the time of origination and are generally better for long-tenure loans (15+ years) as they capture rate reduction cycles over time.

GST is India's unified indirect tax that replaced multiple older taxes (VAT, service tax, excise duty) from July 2017. It applies to the supply of most goods and services in India. For intra-state transactions, GST is split equally into CGST (Central) and SGST (State). For inter-state transactions, IGST (Integrated GST) applies. The main rate slabs are 0%, 5%, 12%, 18%, and 28%. Use our GST Calculator to add or remove GST from any amount.

HRA is a component of your salary paid by your employer to help cover rental expenses. Under the old tax regime, a portion of HRA is exempt from income tax if you actually pay rent. The exemption is the minimum of: (a) actual HRA received, (b) 50% of basic salary (metro) or 40% (non-metro), or (c) actual rent paid minus 10% of basic salary. Under the new tax regime, no HRA exemption is available.

Inflation is the rate at which the general price level of goods and services rises over time, reducing the purchasing power of money. India's CPI (Consumer Price Index) inflation has averaged 5–6% p.a. over the past decade. In practical terms: at 6% inflation, ₹1 lakh today will have the purchasing power of just ₹55,839 in 10 years. Understanding inflation is essential for long-term financial planning. Use our Inflation Calculator to see how inflation affects your money.

LTCG refers to the profit from selling a capital asset (equity shares, mutual funds, property) that was held for a specified minimum period. For equity mutual funds and listed shares, the holding period for LTCG is more than 12 months. Gains above ₹1.25 lakh per year from equity are taxed at 12.5% (no indexation). For property, LTCG applies after 24 months of holding, taxed at 12.5% with indexation or 20% with indexation depending on the asset class.

NAV is the per-unit market value of a mutual fund scheme, calculated daily by dividing the total market value of the fund's assets by the total number of outstanding units. When you invest in a mutual fund, you buy units at the prevailing NAV. When you redeem, you sell units at the NAV on the redemption date. A higher or lower NAV does not make a fund "cheap" or "expensive" — the returns depend on how the NAV grows over time, not its absolute level.

NPS is a government-backed voluntary retirement savings scheme regulated by PFRDA. Contributions to NPS qualify for tax deductions under Section 80CCD(1) (within the ₹1.5L 80C limit) and an additional ₹50,000 under 80CCD(1B) — exclusively for NPS. At retirement (age 60), you must use at least 40% of the corpus to buy an annuity; the remaining 60% can be withdrawn tax-free. NPS is suitable for long-term retirement planning due to its low fund management charges and diversified investment options (equity, government bonds, corporate debt).

Provident Fund is a retirement savings vehicle where both employee and employer contribute regularly. In India, the primary form is EPF (Employees' Provident Fund) for organised sector employees. There is also PPF (Public Provident Fund), a voluntary scheme open to all citizens with a 15-year lock-in but EEE (Exempt-Exempt-Exempt) tax status — contributions, interest, and withdrawals are all tax-free. PPF currently earns 7.1% p.a. and is a safe, tax-efficient instrument for conservative investors.

In the context of loans, the principal is the original amount borrowed, excluding interest. Your EMI payments gradually reduce the outstanding principal — this is called amortisation. In early loan periods, most of your EMI goes toward interest; the principal reduces slowly. Over time, as the outstanding balance reduces, more of each EMI chips away at the principal. In investment contexts, the principal is the original amount you invested before any returns are added.

The Repo Rate (Repurchase Rate) is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks for short-term needs. It is the primary monetary policy tool used by the RBI to control inflation and liquidity in the economy. When the RBI raises the repo rate, banks' borrowing costs rise, causing them to increase lending rates (including home loan rates). When it cuts the rate, loans generally become cheaper. Floating rate home loan borrowers are directly affected by repo rate changes.

Section 80C of the Income Tax Act allows a deduction of up to ₹1.5 lakh per year on specified investments and payments under the old tax regime. Qualifying instruments include: EPF, PPF, ELSS (mutual funds), life insurance premiums, 5-year FD, home loan principal repayment, NSC, SCSS, and children's school/college tuition fees. This deduction reduces your taxable income directly and can save ₹15,000–₹45,000 in taxes depending on your slab. Not available under the new tax regime.

A SIP is a method of investing a fixed amount regularly (typically monthly) in a mutual fund scheme. It automates the investment discipline, uses rupee cost averaging (buying more units when markets are low and fewer when high), and harnesses the power of compounding over time. SIPs can be started with as little as ₹100–₹500/month on most platforms. They are not themselves an investment product — they are a way of investing in any mutual fund. Use our SIP Calculator to estimate your future corpus.

STCG is the profit made from selling an asset held for less than the qualifying long-term period. For equity mutual funds and listed shares, STCG applies when held for 12 months or less, taxed at a flat 20%. For property and gold, STCG applies when held for 24 months or less, taxed at your normal income tax slab rate. Frequent trading in equities triggers STCG and significantly reduces your net returns compared to long-term holding.

TDS is the mechanism by which income tax is collected at the point of payment rather than at year-end. Your employer deducts TDS monthly from your salary and remits it to the government on your behalf. Banks deduct TDS on FD interest if it exceeds ₹40,000/year (₹50,000 for seniors). The TDS rate on salary depends on your estimated annual tax divided by 12. You can claim credit for TDS deducted when you file your Income Tax Return. Use Form 15G (below 60) or 15H (senior citizens) to avoid TDS if your income is below the taxable limit.

Tenure is the duration of a loan or investment. For loans, a longer tenure reduces the monthly EMI but increases the total interest paid over the life of the loan. For a ₹50 lakh home loan at 8.5%, extending the tenure from 15 to 20 years reduces your EMI by ₹5,846/month but adds ₹15.5 lakh in total interest. For investments like FDs or PPF, tenure determines when your money matures and becomes available. Choosing the right loan tenure involves balancing your monthly cash-flow comfort with total cost efficiency.