PaisaBaat Financial Glossary

Interest that has been earned on a debt or investment but has not yet been paid or received by the borrower or lender.

The process of spreading out a loan into a series of equal periodic payments (EMIs) over time. Each payment cover both principal and interest, with the interest portion decreasing and the principal portion increasing over time.

A financial contract, typically with an insurance company, that provides a guaranteed stream of income at regular intervals (monthly, quarterly, or annually) for life or a specified period, commonly used for retirement planning.

A type of mutual fund that leverages the price differential of a security in different markets (like equity cash vs futures) to generate risk-free returns.

The investment strategy of dividing your investment portfolio among different asset classes, such as equities, debt, gold, and real estate, to balance risk and reward based on your goals.

An outstanding loan or receivable that is deemed uncollectible by a bank or financial institution and is written off as a loss.

A type of hybrid mutual fund that dynamically adjusts its asset allocation between equity and debt instruments based on market valuations, using mathematical models.

A financial unit of measurement equal to 1/100th of 1% (0.01%). Often used to describe changes in interest rates, bond yields, and mutual fund expense ratios. For example, a 25 bps hike means a 0.25% increase.

A prolonged period of decline in financial markets, typically characterized by a drop in stock indices of 20% or more from recent highs, driven by investor pessimism.

A fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental), which pays periodic interest and returns the principal at maturity.

A sustained period of rising prices in financial markets, accompanied by investor confidence, economic expansion, and strong demand for equities.

The compound annual growth rate measures the mean annual growth rate of an investment over a specified period longer than one year, assuming the investment grows at a steady rate.

The profit realized from the sale of a capital asset (like real estate, shares, or mutual funds) that has appreciated in value. Capital gains are taxed as Short-Term (STCG) or Long-Term (LTCG) depending on the holding period.

A form of tax levied by the government on basic tax liability for specific purposes, such as the Health and Education Cess on income tax.

A three-digit numeric summary of your credit history, rating, and report, ranging from 300 to 900, maintained by TransUnion CIBIL. A score above 750 is considered excellent and helps in securing loans easily at lower interest rates.

Interest calculated on the initial principal and also on the accumulated interest of previous periods. In simple terms, it is earning 'interest on interest,' which accelerates wealth growth over long horizons.

The primary government account where all revenues received, loans raised, and money received in repayment of loans by the Union Government are deposited.

A term deposit placement made with corporate companies rather than commercial banks. They typically offer higher interest rates than bank FDs but carry credit rating defaults risk.

An index value notified annually by the Income Tax Department to calculate inflation-adjusted acquisition costs for assets, used to calculate long-term capital gains tax.

A statistical score indicating a person's creditworthiness, based on credit history. In India, credit bureaus like CIBIL, Experian, and Equifax generate these scores.

A mutual fund scheme that invests primary assets in fixed income securities like government bonds, corporate debentures, commercial paper, and money market instruments.

A leverage ratio that calculates the proportion of total debt compared to total shareholders' equity in a business, representing its financial stability.

The process of converting physical security certificates (shares, bonds, etc.) into electronic format held in a Demat account.

An accounting method of allocating the cost of a tangible asset over its useful life, representing the wear and tear. Used to reduce business tax liability.

A mutual fund option purchased directly from the Asset Management Company (AMC) without intermediaries or brokers. It has a lower expense ratio because commissions are not paid, resulting in higher returns.

The practice of spreading investments across various financial instruments, industries, and categories to minimize risk exposure to any single asset.

A share of profits distributed by a corporation to its shareholders. In India, mutual funds also pay dividends (now called IDCW) out of realized profits.

A diversified equity mutual fund with a mandatory lock-in period of 3 years. Under Section 80C of the Income Tax Act (Old Regime), investments qualify for tax deductions up to ₹1.5 lakh.

A fixed payment amount made by a borrower to a lender at a specified date each calendar month. EMIs consist of both principal and interest components to fully repay a loan over a set tenure.

A financial metric representing a corporation's net profit divided by the number of outstanding common shares, indicating company profitability.

A mutual fund scheme that primarily invests in stocks and shares of listed corporations, focusing on capital appreciation over medium to long terms.

A temporary pass-through bank account managed by a third party on behalf of two transacting entities, releasing funds only when specific contractual conditions are met.

The cutoff date in the stock market. Investors who buy shares on or after this date will not receive the recently declared dividend payout.

A passive investment fund that tracks an underlying index (like Nifty 50 or Gold) and is traded on stock exchanges throughout the day, just like ordinary stocks.

The annual fee charged by a mutual fund AMC to manage the fund. It is expressed as a percentage of the fund's total assets and is deducted from daily NAV returns.

Foreign Currency Non-Resident account. A term deposit account maintained in foreign currency by NRIs in Indian banks, offering tax-free interest in India.

A secure investment instrument offered by banks and NBFCs where a lump sum is locked for a specific tenure at a guaranteed interest rate. Interest is paid monthly, quarterly, or accumulated.

The accounting year used for tax calculation. In India, the Financial Year begins on April 1 and ends on March 31 of the subsequent calendar year.

The shortfall in government revenue relative to its total expenditure, indicating the total amount of money the government needs to borrow in a financial year.

A close-ended debt mutual fund scheme with a maturity period matching the tenure of the underlying corporate and government debt papers, reducing interest rate risks.

A metric used by banks to assess loan eligibility. It measures a borrower's total monthly loan and rent obligations relative to their net monthly take-home salary. Banks prefer a FOIR under 50%.

The complete prepayment of an outstanding loan amount before the end of the loan tenure, usually to save on interest costs.

A mutual fund that invests exclusively in sovereign debt securities and treasury bills issued by the central and state governments, carrying zero default risk but subject to interest rate volatility.

A lump-sum retirement benefit paid by an employer to an employee as a token of appreciation for services rendered, mandatory after completing 5 continuous years of employment under the Payment of Gratuity Act.

The total taxable income earned by an individual from all 5 heads (Salary, House Property, Business, Capital Gains, and Other Sources) before claiming deductions under Chapter VI-A.

A mutual fund plan option where profits are automatically reinvested back into the scheme, increasing the NAV over time, rather than being paid out.

An indirect, multi-stage, destination-based tax levied on the supply of goods and services in India, replacing multiple older indirect taxes like VAT, Service Tax, and Excise Duty.

A financial investment product (usually backed by government post offices or sovereign bonds) that guarantees a fixed rate of return without market volatility.

An alternative investment fund that pools capital from high-net-worth individuals and uses advanced trading strategies (leverage, short selling) to generate high absolute returns.

A component of salary paid by employers to meet rent expenses. Under Section 10(13A), employees can claim income tax exemptions on HRA based on specific calculations.

A separate legal tax entity in India comprising all persons lineally descended from a common ancestor, eligible to claim tax deductions and hold assets independently of its members.

A mutual fund scheme that pools investments in both equity and debt asset classes, aiming to balance risk and provide moderate growth with stability.

The practice of pledging an asset (like a car or machinery) as collateral to secure a loan. The borrower retains possession, but the lender holds a claim on the asset.

Income Distribution cum Capital Withdrawal. The updated nomenclature for mutual fund dividend options, reflecting that payouts may contain capital withdrawals.

Immediate Payment Service. An electronic fund transfer service in India managed by NPCI, enabling instant interbank fund transfer 24/7 through mobile and netbanking.

The tiered tax rates applicable to individual income brackets in a financial year. Slabs vary based on age categories and the chosen tax regime (Old vs New).

A passive mutual fund that replicates the composition and performance of a specific market index (like Sensex or Nifty 50) with lower fees and zero manager bias.

The process of adjusting the purchase price of an asset using the Cost Inflation Index (CII) to account for inflation, lowering the capital gains tax liability.

The rate at which the general level of prices for goods and services rises, eroding the purchasing power of money. Personal financial planning must account for inflation to protect future wealth.

The first sale of shares by a privately-held corporation to the public, listing the company shares on stock exchanges to raise expansion capital.

A statutory form submitted to the Income Tax Department declaring income details, tax liability, deductions, and tax paid in a financial year, filed before deadline dates.

A bank or investment account held by two or more individuals (e.g. spouses), who share equal access, transaction rights, and liabilities for the account.

A corporate bond with a low credit rating (below investment grade) that offers higher interest yields because of the high risk of default by the corporate issuer.

The senior-most male or female member of a Hindu Undivided Family (HUF) who manages the HUF's family wealth, signs documents, and takes financial decisions.

A mandatory customer identification process performed by banks, mutual fund registries, and brokers in India, requiring Aadhaar, PAN card, and address proof verification.

An open-ended debt mutual fund scheme that invests in very short-term debt papers (up to 91 days maturity), offering high liquidity and low risk.

The ease and speed with which an asset can be converted into ready cash without causing a significant drop in its market value.

A pre-determined timeframe during which an investor is legally barred from selling, redeeming, or withdrawing their invested capital (e.g., 3 years for ELSS, 15 years for PPF).

Capital gains tax levied on the sale of assets held beyond a specified period (e.g. 1 year for equity, 2 years for real estate). Tax rates vary by asset type.

A lending risk assessment metric. It calculates the percentage of the property value or asset value that a bank can finance through a loan. Banks usually cap LTV at 75-80%.

A single, one-time investment placement of money into a financial scheme or mutual fund, as opposed to periodic systematic plans (SIPs).

The total final amount payable to an investor at the end of an investment tenure, including the principal investment sum plus accumulated interest.

A temporary, lender-approved period during a loan tenure where the borrower is not required to pay EMIs (e.g., during education study years or natural disasters).

Micro, Small, and Medium Enterprises. Businesses categorized based on investment in plant/machinery and turnover, eligible for priority banking loan credit.

An equity mutual fund scheme mandated to invest at least 25% of assets each in large-cap, mid-cap, and small-cap stocks, ensuring diversification.

An investment pool that collects money from multiple retail investors and allocates it in a diversified portfolio of stocks, bonds, and securities managed by a fund manager.

The market value of a single unit of a mutual fund scheme, calculated daily by subtracting liabilities from total asset value and dividing by outstanding units.

The default tax system introduced with lower tax rates but excluding major exemptions and deductions. Budget 2026-27 optimized the slabs for maximum benefit.

The launch period of a new mutual fund scheme by an AMC, allowing investors to subscribe to fund units at a face value price, usually ₹10 per unit.

The benchmark stock market index of the National Stock Exchange (NSE) representing the weighted average of 50 of the largest and most actively traded Indian corporations.

A person designated by an account holder or investor to receive the assets or funds in the event of the account holder's death.

A voluntary, government-sponsored, long-term retirement savings scheme managed by PFRDA. It pools contributions into equity and debt and offers extra tax deductions under Section 80CCD.

Non-Resident External account. A rupee bank account maintained by NRIs to deposit foreign income, offering tax-free interest and full repatriation rights.

Non-Resident Ordinary account. A rupee account maintained by NRIs to manage income earned within India (like rent, dividends). Interest is taxable in India.

A secure, post office savings scheme backed by the Government of India, offering fixed interest returns over a 5-year tenure with tax savings under 80C.

A simplified stock market mechanism that allows promoters of listed companies to dilute their holding by selling shares directly to public bidders on the exchange.

The traditional income tax system in India that features higher tax brackets but allows taxpayers to claim tax exemptions and deductions (e.g. 80C, 80D, HRA, Home Loan interest).

A credit facility extended by banks that allows account holders to withdraw money beyond their account balance, paying interest only on the excess amount used.

A valuation ratio that compares a company's current share price relative to its per-share earnings, used to determine if a stock is overvalued or undervalued.

Pension Fund Regulatory and Development Authority. The statutory regulatory body that oversees the pension sector and regulates the National Pension System (NPS) in India.

The complete collection of financial assets and investments held by an individual or institution, including shares, mutual funds, gold, and fixed deposits.

A highly secure, tax-free savings scheme backed by the Indian Government. It features a 15-year tenure, guaranteed interest, and falls under the EEE (Exempt-Exempt-Exempt) tax category.

A fee charged by a bank or lender if a borrower prepays their loan before tenure. RBI has banned foreclosure charges on floating-rate individual home loans.

The original sum of money borrowed in a loan, or the base capital invested in a deposit/investment scheme, excluding any interest.

Institutional investors (like mutual funds, banks, FIIs, and insurance firms) registered with SEBI, who possess expertise to evaluate and invest in large scale capital markets.

A banking investment plan where you deposit a fixed sum monthly for a predetermined tenure, earning interest rates equivalent to a Fixed Deposit.

A systematic method of investing a fixed sum of money at regular intervals (daily, weekly, monthly) to averages acquisition costs.

The interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. A change in the repo rate directly impacts retail home and car loan interest rates.

Real Estate Regulatory Authority. Established under the RERA Act to regulate the housing sector, protect home buyers from project delays, and resolve disputes.

The interest rate commercial banks earn when they deposit their excess funds with the RBI. It helps control market liquidity.

A quick mental math shortcut used to estimate how many years it will take to double an investment. Divide 72 by the annual rate of return (e.g. 72 / 12% = 6 years).

The statutory regulatory body established by the Government of India to protect the interests of retail investors and regulate capital markets and mutual funds.

The benchmark index of the Bombay Stock Exchange (BSE) tracking the market capitalization and performance of 30 of the largest and financially sound companies.

A plan that allows you to invest a fixed sum regularly (monthly or quarterly) in a mutual fund scheme. It instills saving discipline and uses rupee cost averaging.

Government securities denominated in grams of gold issued by the RBI on behalf of the Government, offering a 2.5% annual interest payout and tax-free maturity capital gains.

A flat deduction allowed from gross salary income before tax calculations, requiring no submission of bills or proof. For FY 2026-27, it stands at ₹75,000.

Capital gains tax levied on profits from assets held for short durations. For equity shares, assets sold within 1 year are taxed as STCG.

A mutual fund facility that allows investors to withdraw a fixed sum from their accumulated mutual fund scheme at regular intervals (monthly), creating a regular income.

A range of taxable income levels that are taxed at a specific rate under the income tax laws.

A mechanism introduced by the Income Tax Department where the person responsible for making specified payments (salary, interest, rent) deducts tax at source before paying the recipient.

A pure life insurance plan that offers a high coverage sum assured (death benefit) for a fixed tenure at low premium rates. It has no maturity or survival benefit payouts.

Short-term sovereign debt instruments issued by the Government of India to meet cash requirements, issued with maturities of 91 days, 182 days, and 364 days.

A 12-digit number allotted by EPFO to member employees, linking multiple member IDs allocated by different employers to a single consolidated PF account.

A hybrid financial product that integrates life insurance protection with investment assets (equity/debt mutual fund models) under a single plan.

A form of private equity financing provided by institutional investors to early-stage, high-potential startups and businesses showing high growth prospects.

A statistical metric measuring price fluctuations of a financial security or market index over a given period, representing the level of risk.

A retirement contribution option where employees contribute additional salary (up to 100%) to their EPF account voluntarily beyond the mandatory 12% deduction.

A legal document by which a person declares their wishes as to how their property, wealth, and assets are to be distributed after their death.

A measure of a business's short-term liquidity, calculated by subtracting current liabilities from current assets, indicating funds available for daily operations.

A mathematical method used to calculate the annualized rate of return for a series of cash flows occurring at irregular intervals, standard for measuring SIP performance.

The income return on an investment (such as interest or dividends) expressed as an annual percentage based on the asset's cost or market value.

The total annualized return anticipated on a bond if it is held until its end maturity date, factoring in interest payments and capital gains/losses.

A debt security that does not pay periodic interest. Instead, it is issued at a deep discount to face value and redeemed at par at maturity.

A corporation that has zero long-term or short-term outstanding borrowings or debt liability on its balance sheet, indicating high financial security.