Finance & tax glossary (India)

Short definitions for salaried professionals and small businesses. Each term links to a related calculator or guide where available.

80C: Section 80C of the Income Tax Act allows a deduction of up to ₹1.5 lakh per financial year for specified investments and expenses — EPF, PPF, ELSS mutual funds, life insurance premium, home loan principal, and children's tuition fees among them. The deduction is available only under the old tax regime, and the ₹1.5 lakh cap is shared across all eligible items combined. For someone in the 30% slab, a fully used 80C bucket saves roughly ₹46,800 in tax each year. Learn more
80D: Section 80D gives a deduction for health insurance premiums, separate from and in addition to the 80C limit. You can claim up to ₹25,000 for a policy covering self, spouse, and children (₹50,000 if you are a senior citizen), plus a separate ₹25,000–₹50,000 for parents' policies depending on their age. A ₹5,000 sub-limit for preventive health checkups sits inside these caps. Premiums must be paid through banking channels, not cash, and the deduction applies under the old regime. Learn more
AIS: The Annual Information Statement is the income tax department's consolidated record of your financial activity for the year — salary TDS, bank interest, dividends, mutual fund and share transactions, and property deals reported by banks, employers, and registrars. Before filing your ITR, download the AIS from incometax.gov.in and reconcile it with your Form 16 and bank statements; unreported income visible in AIS is the most common trigger for mismatch notices. Learn more
Basic Pay: Basic pay is the fixed core of your salary on which most other components are anchored: employee and employer PF contributions (12% each, within wage ceiling rules), gratuity, and often HRA (typically 40–50% of basic) are all calculated from it. It usually forms 35–50% of CTC. A lower basic means higher in-hand pay today but a smaller retirement corpus and lower HRA exemption ceiling, so the basic-to-CTC ratio matters when comparing job offers. Learn more
CGST: Central Goods and Services Tax is the central government's share of GST charged on intra-state supplies — when the supplier and place of supply are in the same state. It always appears alongside an equal SGST amount: an 18% GST supply within Maharashtra shows as 9% CGST plus 9% SGST on the invoice. If the supply crosses state lines, IGST applies instead, so the CGST/SGST versus IGST split on an invoice depends entirely on the place of supply. Learn more
CTC: Cost to Company is the total amount an employer spends on you annually — but it is not what reaches your bank account. CTC includes employer PF contribution, gratuity provision, insurance premiums, and sometimes one-time bonuses, none of which appear as monthly cash. Your gross salary (payslip earnings) is lower than CTC, and your net in-hand pay is lower still after PF, professional tax, and TDS deductions. Always compare job offers on estimated in-hand pay, not the CTC headline. Learn more
DA: Dearness Allowance is an inflation-linked salary component, most common in government and public sector jobs, revised periodically against consumer price index movements. Where DA forms part of retirement benefits, it is added to basic pay for PF and gratuity calculations — which is why gratuity formulas reference "basic + DA". Most private sector salary structures do not include DA as a separate line item. Learn more
ELSS: Equity Linked Savings Schemes are diversified equity mutual funds that qualify for the Section 80C deduction, with the shortest lock-in among 80C options at just 3 years. Returns are market-linked — historically attractive over long horizons but never guaranteed, and each SIP instalment carries its own 3-year lock-in. Gains at redemption are taxed under long-term capital gains rules above the annual exemption. ELSS suits investors who want equity growth along with tax saving. Learn more
EMI: An Equated Monthly Instalment is the fixed monthly payment on a loan, covering both interest and principal. Indian home loans use the reducing balance method: EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is principal, r the monthly rate, and n the tenure in months. Early EMIs are interest-heavy — often 70–80% interest in year one of a 20-year home loan — which is why prepayments early in the tenure save far more interest than the same amount paid later. Learn more
EPF: The Employees' Provident Fund is a mandatory retirement scheme for salaried employees in covered establishments: you contribute 12% of basic pay and your employer matches it (part of the employer share funds EPS pension). Interest is declared annually by EPFO and has typically exceeded PPF rates. Your own contribution automatically counts toward the 80C limit. Check your EPF passbook at passbook.epfindia.gov.in quarterly to confirm both contributions are actually being deposited. Learn more
EPS: The Employees' Pension Scheme runs alongside EPF: 8.33% of the employer's PF contribution (within the statutory wage ceiling) is diverted to EPS instead of your PF corpus. It provides a monthly pension after age 58 for members with at least 10 years of service, calculated from pensionable salary and service years. EPS money is not visible as a lump sum in your PF balance, which surprises many employees at withdrawal time. Learn more
FD: A Fixed Deposit is a lump-sum bank deposit locked for a chosen tenure at a fixed interest rate, insured up to ₹5 lakh per bank per depositor by DICGC. Interest is fully taxable at your slab rate, and banks deduct 10% TDS once annual interest crosses the threshold — if you are in the 20–30% slab, the balance tax is your responsibility to pay. FDs suit capital protection and short-term goals; for horizons beyond 5–7 years, inflation usually erodes real returns. Learn more
Form 16: Form 16 is the TDS certificate your employer must issue (typically by 15 June) showing salary paid and tax deposited for the financial year. Part A comes from the TRACES portal and proves TDS deposit with quarterly detail; Part B contains the salary breakup, exemptions, deductions, and tax computation. Before filing your ITR, verify that Part A's total matches your payslips and the AIS — a mismatch usually means the employer deducted tax but delayed depositing it. Learn more
Gratuity: Gratuity is a statutory lump-sum benefit under the Payment of Gratuity Act payable when you leave an employer after 5 or more years of continuous service (the 4-years-240-days rule can also qualify). The formula is (last drawn basic + DA) × 15/26 × completed years of service, with tax exemption up to the notified ceiling for covered employees. It appears inside your CTC as a provision but is only actually paid at exit. Learn more
GST: Goods and Services Tax is India's unified indirect tax on the supply of goods and services, replacing older levies like VAT, service tax, and excise. Common rate slabs include 0%, 5%, 12%, 18%, and 28%, applied by category. Registered businesses charge GST on sales, claim input tax credit on purchases, and file periodic returns (GSTR-1, GSTR-3B). Whether a sale attracts CGST+SGST or IGST depends on whether it is intra-state or inter-state. Learn more
GSTIN: The GST Identification Number is a 15-character registration ID: the first 2 digits are the state code, the next 10 are the business PAN, followed by entity and check characters. A valid supplier GSTIN on a tax invoice is mandatory for B2B supplies, and the buyer's GSTIN must also appear for them to claim input tax credit. You can verify any GSTIN on the GST portal — worth doing before paying a large invoice from a new vendor. Learn more
HRA: House Rent Allowance is a salary component that can be partly tax-exempt under Section 10(13A) if you actually pay rent and opt for the old regime. The exempt amount is the minimum of three values: actual HRA received, rent paid minus 10% of basic, and 50% of basic in metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% elsewhere. Rent above ₹1 lakh a year requires the landlord's PAN. In the new regime, HRA is fully taxable. Learn more
HSN: Harmonized System of Nomenclature codes classify goods on GST invoices and returns. Businesses with annual turnover up to ₹5 crore must show 4-digit HSN codes on B2B invoices; above ₹5 crore, 6 digits are required. Wrong or missing HSN codes cause GSTR-1 filing errors and break the buyer's reconciliation, so fix your main product codes once from the CBIC list and reuse them consistently. Learn more
IGST: Integrated GST applies to inter-state supplies — when the supplier's state differs from the place of supply — and to imports. The full GST rate is charged as a single IGST amount instead of the CGST+SGST split: an 18% supply from Maharashtra to Karnataka shows 18% IGST. Charging the wrong type (CGST/SGST instead of IGST or vice versa) is a common invoicing error that requires corrections in GST returns. Learn more
ITR: An Income Tax Return is the annual statement of income, deductions, and taxes filed with the tax department, with forms matched to income type (ITR-1 for most salaried taxpayers with income up to ₹50 lakh, ITR-3/4 for business income). The usual due date for non-audit cases is 31 July following the financial year. File even when TDS covers your tax fully — refunds, loss carry-forwards, and visa or loan documentation all depend on filed returns. Learn more
LTA: Leave Travel Allowance reimburses domestic travel fare for you and your family and can be tax-exempt under the old regime, subject to conditions: actual travel must happen, the exemption covers fare only (not hotels or food), and it is available for two journeys in a block of four calendar years. Claims need tickets and boarding passes as proof. Under the new regime, LTA is simply taxable salary. Learn more
LTCG: Long-Term Capital Gains arise when you sell an asset held beyond the qualifying period — for listed equity and equity mutual funds the threshold is 12 months, for most other assets longer. Equity LTCG above the annual exemption limit is taxed at the notified rate without indexation. Staggering redemptions across financial years to use each year's exemption is a simple, legal way to reduce LTCG tax on a large corpus. Learn more
Metro city: For HRA exemption purposes, only four cities count as metros — Delhi, Mumbai, Kolkata, and Chennai — where the exemption ceiling is 50% of basic salary. Bengaluru, Hyderabad, Pune, Gurgaon, and Noida are non-metros under this rule at 40% of basic, regardless of their actual rents. In high-rent non-metro cities, the "rent minus 10% of basic" limb of the formula usually binds before the 40% ceiling does. Learn more
NAV: Net Asset Value is the per-unit price of a mutual fund, computed daily as (total assets minus liabilities) divided by units outstanding. Your SIP buys more units when NAV is low and fewer when it is high — that is rupee cost averaging in action. A low NAV does not mean a fund is "cheap" or better; two funds with identical portfolios and different NAVs will deliver identical percentage returns. Learn more
New tax regime: The new (default) tax regime offers lower slab rates and a ₹75,000 standard deduction for salaried taxpayers, but drops most exemptions and deductions — no HRA exemption, 80C, 80D, or home loan interest on self-occupied property. The Section 87A rebate makes tax effectively zero up to roughly ₹12 lakh taxable income. It generally wins for people with few documented deductions; heavy HRA plus 80C plus home-loan profiles should compare both regimes before deciding. Learn more
NPS: The National Pension System is a market-linked retirement scheme where you choose an equity-debt mix and contributions lock in until age 60. Its tax edge: employee contributions get an extra ₹50,000 deduction under 80CCD(1B) over and above the 80C limit, and employer contributions under 80CCD(2) are deductible even in the new regime. At exit, 60% of the corpus is tax-free as a lump sum and the balance must buy an annuity. Learn more
Old tax regime: The old tax regime has higher headline slab rates but allows the full deduction toolkit: HRA exemption, ₹1.5 lakh under 80C, health insurance under 80D, home loan interest under Section 24(b), NPS extra ₹50,000, and more. It typically beats the new regime when documented deductions are large — high metro rent plus a full 80C plus a home loan is the classic winning profile. Compare both regimes with your actual numbers before your payroll declaration deadline. Learn more
PPF: The Public Provident Fund is a 15-year government-backed savings scheme with quarterly-notified interest (recently around 7.1%) and full EEE tax treatment — the contribution is 80C-deductible, and both interest and maturity are tax-free. Annual deposits are capped at ₹1.5 lakh, partial withdrawals open from year 7, and the account can be extended in 5-year blocks. Depositing ₹1.5 lakh yearly for 15 years builds roughly ₹40 lakh, entirely tax-free. Learn more
Professional tax: Professional tax is a state-level levy on salaried and self-employed income, capped by the Constitution at ₹2,500 per year. Rates and slabs differ by state — Maharashtra typically deducts ₹200 monthly (₹300 in February), while some states levy nothing. Your employer deducts it from salary and remits it to the state; the amount paid is deductible from salary income when computing taxable income under the old regime. Learn more
RD: A Recurring Deposit lets you invest a fixed amount every month for a chosen tenure at a fixed interest rate — like a SIP into a bank deposit. It suits disciplined saving toward a near-term goal with a known maturity value. Interest is fully taxable at slab rate like FD interest. For horizons beyond 5 years, compare an RD against a SIP in mutual funds: guaranteed but taxable returns versus market-linked growth potential. Learn more
Rebate 87A: The Section 87A rebate cancels out tax for lower-income resident individuals — in the new regime it makes tax effectively zero up to roughly ₹12 lakh of taxable income (after standard deduction). Two caveats: the rebate applies to taxable income, not gross salary, and certain income such as some capital gains may sit outside its scope. Crossing the threshold even slightly means tax applies per slabs, though marginal relief can soften the cliff. Learn more
SAC: Services Accounting Codes classify services on GST invoices, the way HSN codes classify goods. Every service category has a 6-digit SAC — for example, IT design and development services fall under 9983xx. The correct SAC drives the applicable GST rate and must be reported in GSTR-1, so freelancers and agencies should confirm their primary SAC once from the CBIC list and use it consistently on all invoices. Learn more
SGST: State GST is the state government's share of GST on intra-state supplies, always charged in tandem with an equal CGST amount. On an 18% intra-state invoice you show 9% CGST plus 9% SGST as separate line items. The credit rules matter for businesses: SGST credit can offset SGST and IGST liability but not CGST, which is why the split must be recorded correctly in your books. Learn more
SIP: A Systematic Investment Plan invests a fixed amount into a mutual fund at a regular interval, usually monthly. It automates rupee cost averaging — buying more units when markets fall and fewer when they rise — and removes timing decisions. A step-up SIP increases the amount annually (say 10%) to match salary growth, which can nearly double a 20-year corpus versus a flat SIP. Returns are market-linked and not guaranteed. Learn more
Stamp duty: Stamp duty is a state tax on property transactions and certain agreements, typically 5–7% of the property value depending on the state, buyer gender concessions, and location; registration charges add roughly another 1%. It must be budgeted in cash on top of your down payment — lenders usually do not finance it. Stamp duty paid on a home purchase can be claimed within the 80C limit in the year of payment. Learn more
Standard deduction: The standard deduction is a flat amount subtracted from salary income with no bills or proofs required — ₹75,000 in the new regime for most salaried taxpayers and pensioners. It replaced the old conveyance and medical reimbursement allowances. Because it applies automatically, a ₹12 lakh gross salary becomes ₹11.25 lakh taxable before slabs are applied, which is central to the "zero tax up to ₹12 lakh" arithmetic under the rebate. Learn more
STCG: Short-Term Capital Gains arise from selling an asset before it qualifies as long-term — within 12 months for listed equity and equity funds. Equity STCG is taxed at a flat notified rate regardless of your slab, while short-term gains on most other assets are added to income and taxed at slab rates. No TDS is deducted on most capital gains, so the tax is yours to pay via advance tax if the liability crosses ₹10,000. Learn more
Take-home salary: Take-home (net) salary is what actually lands in your bank account each month: gross earnings minus employee PF, professional tax, TDS, and any other deductions like insurance or loan recovery. It is the number that matters for rent, EMIs, and savings planning — not CTC. Loan eligibility is also assessed on net income through FOIR, with banks typically allowing 40–50% of net monthly income toward total EMIs. Learn more
TDS: Tax Deducted at Source is tax withheld by the payer before money reaches you: employers deduct it monthly from salary under Section 192, banks deduct 10% on FD interest above thresholds, and clients deduct 10% on professional fees under 194J. Every deduction should appear in your AIS and Form 26AS as credit against your final tax bill. If total TDS falls short of actual liability, the balance is payable via advance tax or self-assessment tax. Learn more
VPF: Voluntary Provident Fund lets salaried employees contribute more than the mandatory 12% of basic to their EPF account — up to 100% of basic plus DA. It earns the same EPFO-declared interest as regular EPF and counts within the 80C limit. Note that interest on employee contributions above ₹2.5 lakh a year is taxable, which caps how much VPF makes sense for high earners chasing tax-free fixed-income returns. Learn more