Mutual Fund Glossary — 50+ Terms Explained

A

Alpha: Alpha measures how much a mutual fund has outperformed (or underperformed) its benchmark index. A fund with alpha of +2 means it delivered 2% more return than its benchmark. Alpha is a measure of the fund manager's skill beyond market returns.
Applicable NAV: The specific day's Net Asset Value used to process a purchase, redemption, or switch request -- determined by whether the request was submitted before or after the scheme's cut-off time. Submit before the cut-off on a business day and you typically get that same day's NAV; submit after, and you get the next business day's NAV instead. See Cut-off Time.
AMFI: AMFI stands for Association of Mutual Funds in India. It is the industry body of all SEBI-registered mutual fund houses in India. AMFI publishes daily NAV data for all funds and maintains the list of all registered funds. Their website is amfiindia.com.
AMC: AMC stands for Asset Management Company — the company that manages a mutual fund. For example, HDFC Asset Management Company manages HDFC Mutual Fund schemes. The AMC employs fund managers, analysts, and operations staff. SEBI regulates all AMCs.
AUM: AUM stands for Assets Under Management — the total market value of all investments managed by a mutual fund or fund house. A larger AUM indicates more investor trust, but very large AUM can limit a fund's flexibility in mid and small-cap stocks.
Assessee: The formal legal term, under both the old and new Income-tax Acts, for any person liable to pay tax or otherwise assessed under the Income Tax Act. It covers individuals, HUFs, companies, firms, and other entities — not just individual taxpayers.
Annuity: A financial product that converts a lump sum into a stream of regular periodic payments, typically for the rest of the annuitant's life. This is the insurance/pension sense of the word -- distinct from the "annuity-style payout" terminology used elsewhere on this site for SCSS and POMIS's non-compounding interest payouts. In the Indian retirement context, annuity comes up specifically with NPS, where the mandatory annuity portion of your NPS corpus (usually 20-40%, depending on the exit model) must be used to purchase an annuity plan from an insurance company, which then pays you a monthly pension for life.
Annuity Service Provider (ASP): An insurance company registered with PFRDA and empanelled to sell annuity plans to NPS subscribers at retirement. When an NPS subscriber's mandatory annuity portion is used to buy a pension, they are choosing both an ASP and an annuity plan type (e.g., pension for life, pension for life with return of purchase price, joint life pension covering a spouse) from among the empanelled providers.

B

Benchmark: A benchmark is a standard index against which a mutual fund's performance is measured. For example, a large-cap fund is typically benchmarked against the Nifty 50 or BSE Sensex. A fund that consistently beats its benchmark is considered to be performing well.
Beta: Beta measures a fund's volatility relative to its benchmark. A beta of 1 means the fund moves in line with the market. Beta above 1 means the fund is more volatile than the market (amplifies both gains and losses). Beta below 1 means lower volatility.
Blue Chip Fund: A blue chip fund invests primarily in blue chip companies — large, well-established, financially stable companies with a long track record. These are typically the top 100 companies by market capitalisation. Blue chip funds offer relatively lower risk than mid or small-cap funds.

C

CAGR: CAGR stands for Compound Annual Growth Rate. It is the annualised rate of return that takes compounding into account. For example, if a fund grew from Rs 1 lakh to Rs 2 lakhs over 5 years, the CAGR is approximately 14.9% per year. CAGR is the standard way to compare mutual fund returns.
Cut-off Time: The deadline by which a mutual fund transaction request must be submitted on a business day to receive that same day's NAV. The standard cut-off for most scheme categories is 3:00 PM; liquid and overnight funds use an earlier cut-off, typically 1:30 PM. A request submitted after the cut-off (or on a non-business day) is processed at the next business day's NAV instead.
Corpus: Corpus refers to the total accumulated value of an investment at a given point in time. When you calculate how much your SIP will be worth in 10 years, that future total is called your corpus. Also used to refer to the total pool of money managed by a mutual fund.
Credit Risk: Credit risk is the risk that a bond issuer (company or government entity) will fail to pay interest or repay the principal. Debt mutual funds that invest in lower-rated bonds carry higher credit risk. Higher credit risk typically comes with higher yield (return) to compensate investors.
Chapter VI-A: The part of the Income Tax Act that contains most of the well-known personal deductions — including Sections 80C, 80D, 80E, 80G, 80TTA, and 80TTB. These are collectively referred to as "Chapter VI-A deductions." Nearly all of them are available only under the old tax regime.

D

Debt Fund: A debt mutual fund invests primarily in fixed-income instruments — government bonds, corporate bonds, treasury bills, and money market instruments. Debt funds are generally lower risk than equity funds but also offer lower returns. They are suitable for short-to-medium term goals.
Direct Plan: A Direct Plan is a version of a mutual fund scheme where you invest directly with the fund house, without going through a distributor or broker. Direct plans have a lower expense ratio (typically 0.5-1% lower per year) than Regular plans, resulting in higher NAV growth and better long-term returns.
Diversification: Diversification is the investment strategy of spreading money across many different assets, sectors, or geographies to reduce risk. Mutual funds are inherently diversified — a single fund may hold 30-100 different stocks, so the failure of one company does not devastate your portfolio.
Dividend Option: In a mutual fund's Dividend Option (now called IDCW — Income Distribution cum Capital Withdrawal), the fund periodically distributes a portion of its profits to investors as dividends. The NAV falls by the dividend amount after distribution. Growth option is generally preferred for long-term wealth creation.
DTAA: DTAA (Double Taxation Avoidance Agreement) is a bilateral tax treaty between India and another country that prevents an NRI's Indian income from being taxed twice -- once in India via TDS, and again in their country of residence. Claiming it requires filing a Tax Residency Certificate and Form 10F with the payer before income is paid. Treaty rates vary by country and by income type.
DICGC Insurance: Deposit insurance provided by the Deposit Insurance and Credit Guarantee Corporation (a wholly-owned RBI subsidiary) that covers bank deposits -- including bank FDs, savings accounts, and RDs -- up to Rs 5 lakh per depositor per bank, covering both principal and interest. This insurance does NOT extend to non-bank instruments like Corporate/Company FDs, mutual funds, or stocks -- a distinction worth knowing when comparing a bank FD's safety to a higher-yielding but uninsured corporate FD.
Doubling Period: The length of time it takes an investment to double in value at a given fixed interest rate. It comes up most often with Kisan Vikas Patra (KVP), where the government directly publishes the exact doubling period (currently 115 months at KVP's 7.5% rate) instead of requiring investors to calculate it themselves via the Rule of 72 or a compound-interest formula.

E

eMandate: A digital standing instruction authorising your bank (or UPI app) to automatically debit a fixed amount for your SIP at regular intervals, without you approving each individual payment. Implemented via NACH, e-NACH, or UPI Autopay. Also called an OTM (One-Time Mandate). An expired or lapsed eMandate is one of the most common reasons a SIP silently stops.
e-NACH: The digital version of NACH -- you authenticate the mandate online via net banking login or Aadhaar-based OTP instead of a paper form, with bank approval typically coming through in a day or two rather than weeks. Not supported by every bank; a small number of smaller and cooperative banks require physical NACH or UPI Autopay instead.
ELSS: ELSS stands for Equity Linked Savings Scheme — a type of mutual fund that invests in equities and qualifies for tax deduction under Section 80C of the Income Tax Act, renamed Section 123 under the Income-tax Act, 2025 (up to Rs 1.5 lakhs per year, unchanged). ELSS has a mandatory 3-year lock-in period, the shortest among all Section 80C/123 investments.
Expense Ratio: Expense ratio is the annual fee charged by a mutual fund to cover its operating costs — fund management, administration, marketing, and distribution. Expressed as a percentage of AUM, it is deducted daily from the fund's NAV. A lower expense ratio means more of the returns stay with you.
Exit Load: Exit load is a fee charged when you redeem (sell) mutual fund units before a specified period. For example, many equity funds charge 1% exit load if you redeem within 1 year of investing. After the exit load period, redemption is free. Exit load discourages short-term trading.
Equity Fund: An equity mutual fund invests primarily (at least 65%) in stocks (equities). Equity funds are growth-oriented and carry higher risk than debt funds, but have historically delivered higher long-term returns. Categories include large-cap, mid-cap, small-cap, flexi-cap, and sectoral funds.
Employee Provident Fund (EPF): EPF is a mandatory retirement savings scheme most salaried employees are enrolled in, with both employee and employer contributing (typically 12% of Basic + DA each). The employee's own contribution isn't a separate tax deduction -- it's simply counted within the Section 80C / 123 limit (Rs 1.5 lakhs/year) along with any other 80C investments. Employer contributions to EPF, NPS, and superannuation combined are tax-free only up to Rs 7.5 lakhs a year (Section 17(2)(vii)); any excess is taxed as salary. Interest credited on the employee's own contribution above Rs 2.5 lakhs a year is also taxable. See VPF for the voluntary top-up version.

F

FATCA: FATCA (Foreign Account Tax Compliance Act) is US legislation requiring foreign financial institutions, including Indian banks and mutual funds, to identify and report accounts held by US taxpayers to the US IRS, under an agreement India signed with the US in 2015. It is why several Indian AMCs impose extra paperwork -- or restrict onboarding altogether -- for US-resident NRIs.
FCNR: FCNR (Foreign Currency Non-Resident) is a term deposit account that NRIs hold in a foreign currency (USD, GBP, EUR, etc.) rather than rupees, so it carries no currency-conversion risk. Interest is fully exempt from Indian income tax, and both principal and interest are freely repatriable.
FEMA: FEMA (Foreign Exchange Management Act, 1999) is the Indian law governing cross-border money movement, foreign exchange, and which bank accounts (NRE/NRO/FCNR) NRIs must use in place of a resident savings account. Repatriation limits -- like the USD 1 million/year cap on NRO account transfers -- are set under FEMA regulations.
Flexi Cap Fund: A flexi cap fund can invest in stocks of any market capitalisation — large, mid, or small cap — without any fixed allocation limit. The fund manager has full flexibility to move between market caps based on opportunity. This makes flexi cap funds more dynamic than category-restricted funds.
Folio: A folio is a unique account number assigned to an investor by a fund house when they make their first investment. Each investor has one folio per fund house (not per scheme). All your investments in different schemes of the same AMC are tracked under a single folio number.
Form 15CA/15CB: Form 15CA (a remitter's self-declaration) and Form 15CB (a Chartered Accountant's certificate confirming taxes are settled) were the documents required before sending money abroad from India -- for example, repatriating NRO funds above Rs 5 lakh. From April 1, 2026, these are replaced by Form 145 and Form 146 respectively under the Income-tax Act, 2025, with the same underlying purpose.
Fund House: A fund house is the company (AMC) that operates and manages mutual fund schemes. Examples include HDFC Mutual Fund, SBI Mutual Fund, Axis Mutual Fund, Mirae Asset, and Nippon India. India has 44 SEBI-registered AMCs as of 2026.
Fund Manager: A fund manager is the professional who makes investment decisions for a mutual fund — deciding which stocks or bonds to buy, hold, or sell. The fund manager's skill (measured by alpha and long-term track record) is a key factor in an actively managed fund's performance.
Form 10-IEA: The form that taxpayers with business or professional income must file to opt out of the (now-default) new tax regime and into the old regime. It must be filed on or before the ITR due date to be valid for that year. Once filed, such taxpayers get only one lifetime opportunity to switch back to the new regime later. Salaried individuals with no business or professional income do not need this form — they can switch regimes freely every year through a simple declaration or ITR selection.

G

Gilt Fund: A gilt fund invests exclusively in government securities (G-Secs) issued by the central or state government. They carry zero credit risk (the government cannot default) but have high interest rate risk — NAV falls when interest rates rise. Suitable for conservative, long-term debt investors.
Growth Option: In the Growth Option of a mutual fund, profits are not distributed as dividends — they are reinvested, and the NAV grows over time. Growth option is generally better for long-term wealth creation because you benefit from compounding on the full corpus.
Gross Total Income (GTI): The sum of income from all five heads — salary, house property, business/profession, capital gains, and other sources — before any Chapter VI-A deductions are applied. Chapter VI-A deductions are subtracted from GTI to arrive at taxable income. GTI is a mid-point figure in the tax computation, not the final taxable amount.
Government Securities (G-Sec): Debt instruments issued by the Government of India (and state governments) to borrow money from the market, generally considered to carry effectively zero credit risk since they're backed by the sovereign. Several retirement and pension products, including NPS's debt-allocation option and some annuity providers' underlying investments, hold G-Secs as part of their portfolio -- relevant context for understanding why certain "safe" allocations within a market-linked product like NPS are considered lower-risk than an equity allocation.

H

Hybrid Fund: A hybrid fund invests in a mix of equities and debt instruments. The allocation varies by sub-type: conservative hybrid (mostly debt), balanced hybrid (roughly equal), and aggressive hybrid (mostly equity). Hybrid funds offer a single-product solution for investors wanting both growth and stability.
Health & Education Cess: A flat 4% levy applied on top of (income tax + surcharge), identical under both tax regimes. It funds government health and education initiatives. It is an additional charge, not a deduction or exemption.
HRA (House Rent Allowance): A salary component paid by an employer to help cover an employee's rental housing costs. Under Section 10(13A), a portion of it is tax-exempt — but only under the old tax regime — calculated as the least of three amounts: actual HRA received; rent paid minus 10% of Basic+DA; or 50% (metro cities) / 40% (non-metro cities) of Basic+DA. If no rent is actually paid, the entire HRA becomes taxable.

I

Index Fund: An index fund passively replicates a stock market index (e.g. Nifty 50 or Sensex) by holding the same stocks in the same proportions. No active stock selection is done. Index funds have very low expense ratios (0.1-0.2%) and have consistently outperformed most actively managed funds over long periods.
IDCW: IDCW stands for Income Distribution cum Capital Withdrawal — the new SEBI-mandated name for what was previously called the "Dividend Option" of mutual funds. Under IDCW, the fund distributes money to investors periodically, reducing the NAV by the distributed amount. The amount is not guaranteed.
Inflation: Inflation is the rate at which prices rise over time, reducing the purchasing power of money. India's average inflation is 5-6% per year. If your investment returns 6% but inflation is 6%, your real return is effectively 0%. This is why investments need to beat inflation to create real wealth.

L

Lien: A legal marker placed on mutual fund units at a lender's request when you pledge them as collateral for a loan. A lien freezes the marked units from being redeemed, switched, or transferred while the loan is outstanding, though you remain the owner and the units continue to participate in the fund's returns. Removed once the loan is fully repaid. See Pledge.
Large Cap Fund: A large cap fund invests at least 80% of its assets in the top 100 companies by market capitalisation. These are India's biggest and most established companies (Reliance, TCS, Infosys, HDFC Bank, etc.). Large cap funds are relatively stable and less volatile than mid or small cap funds.
Liquid Fund: A liquid fund invests in very short-term money market instruments (maturity up to 91 days). They are extremely low-risk and offer better returns than a savings account. Ideal for parking emergency funds or surplus cash for 1 week to 3 months. Redemptions are typically processed within 24 hours.
Lock-in Period: A lock-in period is the minimum time you must hold an investment before you can redeem it. ELSS funds have a 3-year lock-in. Regular mutual funds (non-ELSS) have no lock-in — you can redeem at any time (subject to exit load in the first year). PPF has a 15-year lock-in.
Lower-TDS Certificate: Also called a Form 13 certificate (Section 197 of the Income Tax Act), this is issued by an Assessing Officer authorising a lower rate of TDS deduction than the default -- most commonly used by NRIs selling property, so the buyer withholds tax on the actual capital gain instead of the full sale price. Applied for via the TRACES portal before the transaction closes; processing typically takes 15-45 days.
LRS: LRS (Liberalised Remittance Scheme) lets RESIDENT Indian individuals remit up to USD 2,50,000 per financial year abroad for permitted purposes. It does NOT apply to NRIs repatriating their own NRE/NRO/FCNR money -- that is governed separately by FEMA regulations. TCS applies to LRS remittances above a Rs 10 lakh threshold.
LTCG: LTCG stands for Long Term Capital Gains. For equity mutual funds, gains on units held for more than 1 year are considered long-term and taxed at 12.5% on amounts above Rs 1.25 lakh per financial year (Budget 2024 rates, effective July 2024). Debt funds no longer get LTCG/indexation treatment -- units acquired on or after 1 April 2023 are taxed at the investor's income slab rate regardless of holding period (units bought before that date may still be grandfathered under the old 20%-with-indexation rule).

M

Mid Cap Fund: A mid cap fund invests at least 65% in companies ranked 101st to 250th by market capitalisation. Mid cap companies are growing businesses with higher return potential than large caps but also higher risk and volatility. They perform exceptionally well in bull markets but can fall sharply in downturns.
Mutual Fund: A mutual fund pools money from many investors and invests it in a diversified portfolio of stocks, bonds, or other assets according to a stated investment objective. Professional fund managers make investment decisions. Each investor owns units proportional to their investment.
Marginal Relief: A smoothing mechanism that prevents a small rise in income from causing a disproportionately large jump in tax liability when a taxpayer crosses a rebate or surcharge threshold. It applies to the new regime's Section 87A rebate cliff near ₹12,00,000, and to every surcharge threshold (₹50 lakh, ₹1 crore, ₹2 crore, ₹5 crore) under both tax regimes. It ensures nobody ends up worse off in absolute terms simply for earning slightly more.

N

NACH: National Automated Clearing House -- the original, NPCI-run electronic mandate system for recurring bank debits in India, used for SIPs, insurance premiums, and loan EMIs alike. Traditionally set up via a physical form at your bank, which could take days to a couple of weeks for approval. See eMandate and e-NACH for the faster digital alternatives.
Nomination: Naming one or more people (nominees) on a mutual fund folio who should receive the units if the investor dies. A free, few-minutes step available online. Without a nominee, legal heirs must obtain a Succession Certificate or probate through a court before the AMC can transmit the units -- a process that can take 6 months to 2+ years, versus a few weeks with a valid nominee on file.
NAV: NAV stands for Net Asset Value — the per-unit price of a mutual fund on a given day. Calculated as: (Total Fund Assets - Liabilities) / Total Units Outstanding. NAV is declared at the end of every trading day after markets close. A higher NAV does not mean a more expensive fund.
NFO: NFO stands for New Fund Offer — the initial launch period of a new mutual fund scheme during which units are offered to investors at a fixed price (usually Rs 10 per unit). NFOs have no performance history, making them harder to evaluate. Generally, established funds with track records are preferable to NFOs.
NRE: NRE (Non-Resident External) is a rupee-denominated bank account for an NRI's foreign-earned income remitted to India. Interest is fully exempt from Indian income tax under Section 10(4)(ii), and both principal and interest are freely and fully repatriable abroad with no cap. Only foreign income can be deposited -- not India-sourced income like rent or dividends.
NRO: NRO (Non-Resident Ordinary) is the rupee bank account where an NRI's India-sourced income must be deposited -- rent, dividends, pension, or interest on investments made before becoming an NRI. NRO interest is fully taxable, with a flat 30% TDS (31.2% with cess) under Section 195 from the first rupee. Repatriation is capped at USD 1 million per financial year under FEMA, typically requiring a CA certificate (Form 15CA/15CB, replaced by Form 145/146 from April 2026).
New Tax Regime: The current default tax structure, offering lower slab rates and a higher standard deduction, but with almost no deductions or exemptions available — only the standard deduction, employer NPS contribution under Section 80CCD(2), and home loan interest on a let-out property survive. Introduced in 2020 and substantially revised in Budget 2023 and Budget 2025, it is now the automatic choice unless a taxpayer opts out.

O

OTM (One-Time Mandate): The umbrella term AMCs and RTAs use for a "set it once, debit repeatedly" SIP authorisation -- not a separate rail of its own, but the concept that NACH, e-NACH, and UPI Autopay all implement. Registering an OTM once with an AMC/RTA can cover multiple future SIPs across different schemes of the same fund house, up to the ceiling amount set at registration.
Old Tax Regime: The original tax structure, featuring higher slab rates but a wide menu of deductions and exemptions — including Section 80C, 80D, HRA, and home loan interest, among others. It is no longer the default; taxpayers must actively opt into it each year (salaried individuals via a simple declaration, those with business/professional income via Form 10-IEA).

P

Pledge: Offering mutual fund units as collateral for a loan, without redeeming them. The lender places a lien on the pledged units (see Lien) and disburses a loan up to a percentage of their current value (the loan-to-value ratio). Debt funds typically get a higher loan-to-value than equity funds since they are less volatile. Lets you raise cash while keeping the investment intact and invested.
PIS: PIS (Portfolio Investment Scheme) is the RBI-mandated route an NRI must register for through a bank before buying or selling shares on Indian stock exchanges directly, or using Portfolio Management Services (PMS). It requires a linked NRE/NRO account plus a trading and demat account. Investing in mutual funds does NOT require a PIS account -- that restriction applies only to direct equity/PMS trading.
Portfolio: A portfolio is the complete collection of all investments held by an investor or a fund. A mutual fund's portfolio is the list of all stocks, bonds, or other assets it currently holds. Reviewing a fund's portfolio regularly helps you understand what you are actually invested in.
Pass-Through Taxation: A tax treatment where the income earned by an investment vehicle -- like a REIT or InvIT -- is not taxed at the vehicle/trust level but instead "passes through" to be taxed in the hands of the individual investor, based on the nature of that income. For example, the interest or rental component of a REIT distribution is taxed at the investor's own slab rate rather than being taxed once inside the trust and again when distributed.

R

Redemption: Redemption means selling your mutual fund units and receiving the equivalent cash. When you redeem, you receive units x current NAV, minus any applicable exit load. Equity fund redemptions are typically credited to your bank account within 2-3 business days.
Regular Plan: A Regular Plan is the version of a mutual fund scheme sold through distributors and brokers, who earn a commission from the fund house. This commission is built into a higher expense ratio compared to Direct Plans. Regular plans have lower NAV growth but may be appropriate if you receive genuine ongoing advisory services.
RNOR: RNOR (Resident but Not Ordinarily Resident) is a transitional tax status under Section 6(6), mainly relevant to NRIs returning to India. You qualify as RNOR if you were a Non-Resident in 9 of the preceding 10 financial years, OR present in India for 729 days or fewer across the preceding 7 financial years. An RNOR is taxed only on India-sourced income -- like an NRI -- even though technically a Resident, typically for 2-3 years after moving back.
Rupee Cost Averaging: Rupee cost averaging is the natural outcome of SIP investing — when markets are low, your fixed monthly amount buys more units; when markets are high, it buys fewer units. Over time, this averages out your cost per unit and reduces the impact of market timing on your returns.

S

Statement of Account (SoA): The standard, non-demat way mutual fund unit holdings are recorded -- as an entry in the AMC/RTA's registry, evidenced by periodic statements (or a Consolidated Account Statement across AMCs), rather than as a dematerialised security in a demat account. Most direct mutual fund investors hold units this way; holding units in demat mode instead is optional and more common for investors who also trade stocks/ETFs through the same demat account.
Switch: Moving your investment from one mutual fund scheme to another -- most often between Regular and Direct plans of the same fund, or between an equity and debt scheme of the same AMC. Mechanically, a switch is processed as a redemption from the source scheme immediately followed by a fresh purchase into the target scheme, so it triggers the same capital gains tax treatment as a plain redemption on the source-scheme leg.
SEBI: SEBI stands for Securities and Exchange Board of India — the regulatory body that governs all mutual funds, stock markets, and securities in India. SEBI sets rules for fund categorisation, expense ratios, disclosure requirements, and investor protection. All mutual funds must be SEBI-registered.
Section 195: Section 195 of the Income Tax Act is the provision requiring anyone paying an NRI -- a property buyer, a mutual fund AMC/RTA, a bank -- to deduct TDS before the money is paid, at the applicable rate for that income type (e.g. flat 30%+cess on NRO interest, slab-linked capital gains rates on property and mutual fund redemptions). It is the legal basis for nearly all NRI TDS, distinct from the lower TDS rates residents face on similar income.
SIP: SIP stands for Systematic Investment Plan — a method of investing a fixed amount in a mutual fund at regular intervals (weekly, monthly, or quarterly). SIP harnesses rupee cost averaging and the power of compounding to build wealth over time. It is not a product itself but a way of investing.
Small Cap Fund: A small cap fund invests at least 65% in companies ranked 251st and below by market capitalisation. Small cap companies have the highest growth potential but also the highest risk and volatility. They can be difficult to exit quickly in a crash due to lower liquidity. Suitable only for long-term (7+ years) risk-tolerant investors.
STP: STP stands for Systematic Transfer Plan — a facility to automatically transfer a fixed amount from one mutual fund scheme to another at regular intervals. Commonly used to move money from a liquid fund to an equity fund gradually, reducing market timing risk when deploying a large lump sum.
SWP: SWP stands for Systematic Withdrawal Plan — a facility to automatically redeem a fixed amount from your mutual fund investment at regular intervals. SWP is useful for creating a regular income stream from your investments, commonly used by retirees to generate monthly income from their corpus.
Step-Up SIP: A step-up SIP (also called top-up SIP) is an SIP where the monthly investment amount increases by a fixed percentage every year, typically in line with salary increments. For example, a Rs 5,000 SIP with 10% annual step-up becomes Rs 5,500 in year 2, Rs 6,050 in year 3, and so on.
Standard Deduction: A flat deduction subtracted from salary or pension income before tax is computed. For FY 2026-27 it is ₹75,000 under the new tax regime and ₹50,000 under the old tax regime. No bills, receipts, or investment proof are needed — it is applied automatically. It is one of the few deductions available under both tax regimes.
Section 87A Rebate: A rebate that reduces income tax liability to zero when taxable income falls at or below a set threshold — ₹12,00,000 under the new regime (maximum rebate ₹60,000) or ₹5,00,000 under the old regime (maximum rebate ₹12,500). It is different from a "tax-free slab" — the rebate is applied after tax is computed on the slabs, not built into the slabs themselves. The new regime also has marginal relief just above its threshold; the old regime does not.
Surcharge: An additional percentage levied on the income tax amount itself (before cess) once total income crosses ₹50 lakh, ₹1 crore, ₹2 crore, or ₹5 crore, with the rate rising at each threshold. Under the new regime, surcharge is capped at 25% even beyond ₹5 crore; under the old regime it rises to 37% beyond ₹5 crore. Marginal relief applies at every threshold to smooth the transition.
Sum Assured: The guaranteed amount an insurance policy -- including a ULIP's insurance component -- pays out to the nominee on the death of the policyholder, distinct from the policy's investment or maturity value. For a ULIP to qualify for a Section 80C deduction, the sum assured must be at least 10 times the annual premium.
SPV (Special Purpose Vehicle): A separate legal entity created to hold a specific asset or group of assets -- commonly used in REIT/InvIT structures to actually own the underlying real estate or infrastructure asset. The SPV's income is designed to flow through to the REIT/InvIT's unit-holders under pass-through taxation rules, rather than being taxed twice -- once at the SPV level and once at the investor level.

T

Transmission: The process of transferring a deceased investor's mutual fund units to their nominee or legal heirs. If a valid nominee was registered, transmission is a comparatively fast AMC/RTA process (typically a few weeks) needing a death certificate and the nominee's KYC. Without a nominee, legal heirs must first establish their claim via a Succession Certificate or probate, which can take 6 months to 2+ years. The cost basis and holding period of the original investor generally carry over for the new holder's future capital gains calculation.
TER: TER stands for Total Expense Ratio — the total annual cost of running a mutual fund, expressed as a percentage of AUM. It includes fund management fees, administrative costs, marketing expenses, and distributor commissions (for Regular plans). TER is the same as expense ratio.
TRC: A Tax Residency Certificate (TRC) is a document issued by the tax authority of the country where an NRI is a resident, confirming that residency for a given financial year. Submitting a TRC together with Form 10F to the Indian payer (bank, AMC/RTA, buyer) before income is paid is what lets an NRI claim the lower DTAA treaty rate on dividends, interest, or capital gains instead of the higher default domestic TDS rate.
Tax Year (Income-tax Act 2025): The terminology introduced by the Income-tax Act, 2025 (effective 1 April 2026) to replace the earlier two-step "Previous Year / Assessment Year" naming. "Tax Year" simply refers to the year in which income is earned and assessed, described using a single label instead of two. This is a terminology simplification — it does not change how or when tax is actually computed or filed.
Tier I / Tier II Account: The two account types within the National Pension System (NPS). Tier I is the primary, mandatory retirement account -- contributions are tax-deductible, but the account is locked until age 60 with a mandatory partial annuity purchase at exit. Tier II is a voluntary, no-lock-in account that can only be opened by someone who already holds a Tier I account -- funds can be withdrawn anytime, but (with a narrow exception for a special tax-saver Tier II variant available only to government employees) Tier II contributions get no tax deduction.

U

UPI Autopay: A way to authorise recurring SIP debits directly within your UPI app (Google Pay, PhonePe, a bank's own app) using your UPI PIN -- often the fastest of all mandate types to set up, sometimes active within minutes. Carries a per-instalment amount cap set by NPCI (commonly cited around Rs 1,00,000, though this has been revised before) -- larger SIPs typically use NACH or e-NACH instead, which have no such per-debit ceiling.
Unit: A unit is the smallest denomination of ownership in a mutual fund. When you invest in a mutual fund, your money is converted into units at the current NAV. If you invest Rs 5,000 and the NAV is Rs 50, you receive 100 units. Your investment value = number of units x current NAV.

V

Volatility: Volatility refers to how much and how quickly the price of an investment fluctuates. High volatility means large price swings — an equity fund may rise 30% in one year and fall 20% the next. Volatility is measured by standard deviation. Higher volatility = higher risk but also potential for higher returns.
Voluntary Provident Fund (VPF): VPF lets an employee voluntarily contribute more than the standard 12% EPF rate, up to 100% of Basic + DA, into the same EPF account -- earning the same government-declared interest rate as EPF. Unlike EPF, the employer is not required to match a VPF top-up. VPF contributions also count within the Section 80C / 123 limit (Rs 1.5 lakhs/year), and are subject to the same interest-taxability rule as EPF once the employee's own contribution (EPF + VPF combined) crosses Rs 2.5 lakhs a year.
Vesting Age: The age at which a pension or annuity plan actually begins paying out. For NPS this is normally 60 (though early or deferred vesting is possible under specific conditions), and for Atal Pension Yojana it is fixed at exactly 60. Before the vesting age, contributions are accumulating; from the vesting age onward, the accumulated corpus converts into -- or is used to purchase -- the actual pension payments.

X

XIRR: XIRR stands for Extended Internal Rate of Return — a method to calculate the annualised return on an investment where cash flows occur at irregular dates and amounts (like SIP investments). Unlike simple CAGR, XIRR accurately accounts for the timing of each individual payment.

Y

Yield: Yield is the income generated by an investment expressed as a percentage of its cost or current value. For debt funds, yield refers to the interest income generated by the bonds held. Yield to Maturity (YTM) is a key metric for debt funds, indicating the annualised return if all bonds are held to maturity.