Financial Glossary

US employer-sponsored retirement account with pre-tax or Roth contributions and an annual contribution limit set by the IRS.

Indian tax rebate that zeroes out tax liability for filers with taxable income up to INR 7 lakh (New Regime) or INR 5 lakh (Old Regime).

Your total US income minus specific 'above-the-line' deductions like HSA, IRA, and student loan interest.

APR is the nominal annual rate without compounding; APY is the effective annual rate that includes compounding within the year.

Annual tax-free amount of UK capital gains - cut to GBP 3,000 per individual from April 2024.

Tax on the profit from selling an investment or asset, taxed at different rates for short-term vs long-term holdings.

Interest earned on both the original principal and previously accumulated interest, producing exponential growth over time.

Ratio of monthly debt payments to gross monthly income - the primary mortgage underwriting test, typically capped at 43%.

Annual tax-free portion of UK dividend income - reduced to GBP 500 per individual from April 2024.

Investment strategy of contributing a fixed amount at regular intervals regardless of price, smoothing out market timing risk.

Indian tax classification where contributions, growth, and withdrawals from a savings instrument are all completely tax-free.

Total tax paid divided by total taxable income - the 'average' tax rate that captures the impact of progressive brackets and deductions.

Liquid cash reserve covering 3 to 6 months of essential expenses, designed to cover unexpected shocks without resorting to debt.

Indian mandatory retirement scheme where employee and employer each contribute 12% of basic salary to a tax-advantaged fund.

An employer-sponsored program that lets US employees buy company stock at a discount through payroll deduction.

Three-digit US credit score (300-850) built by FICO from credit-bureau data, used by 90% of lenders.

Annual TDS certificate issued by an Indian employer to a salaried employee, summarising salary paid and tax deducted at source.

Pre-tax employer-sponsored account for medical or dependent-care expenses, with a strict use-it-or-lose-it rule.

The value of a current sum at a specified date in the future after applying a given interest or growth rate.

Indian salary component for renters, exempt from income tax up to a formula-based limit under Section 10(13A).

Triple tax-advantaged US account for medical expenses, available to those enrolled in a high-deductible health plan.

The real return on an investment after subtracting inflation, showing the actual increase in purchasing power.

The discount rate that makes the NPV of all project cash flows exactly zero - effectively, the project's intrinsic compound return.

UK tax-free savings or investment wrapper with an annual subscription limit of GBP 20,000.

Ratio of a loan balance to the underlying asset's value - used by lenders to gauge risk and to trigger PMI on mortgages.

Tax on Indian long-term capital gains - 12.5% on listed shares above INR 1.25 lakh per year and 12.5% on most other assets (no indexation from July 2024).

The tax rate applied to your next dollar of income - critical for any 'should I take this raise / deduction / Roth?' decision.

Your AGI with certain deductions added back, used to test eligibility for IRA contributions, ACA subsidies, and IRMAA.

The schedule of principal and interest payments over the life of a mortgage - early payments are mostly interest, later payments mostly principal.

Prepaid mortgage interest paid at closing to reduce your loan's interest rate - each point costs 1% of the loan amount.

UK social-security tax funding the State Pension, NHS, and benefits, paid by both employees and employers on earnings above thresholds.

The current value of a future stream of cash flows discounted at a chosen discount rate - positive NPV means the project beats the discount rate.

Voluntary Indian retirement scheme with market-linked returns and an additional INR 50,000 tax deduction under Section 80CCD(1B).

HMRC's UK system for collecting income tax and National Insurance directly from employee pay each pay period.

Annual tax-free portion of UK income - GBP 12,570 for most taxpayers, tapered to zero above GBP 125,140.

Insurance lenders require on conventional mortgages with less than 20% down payment, protecting the lender if you default.

Government-backed Indian long-term savings scheme with EEE tax status and a 15-year lock-in.

Annual IRS-mandated withdrawal from most US retirement accounts starting at age 73.

The theoretical return on an investment with zero default risk - usually proxied by short-term US Treasury bill yields.

An individual retirement account funded with after-tax money, with completely tax-free qualified withdrawals in retirement.

Indian income-tax deduction for home loan interest - up to INR 2 lakh per year for a self-occupied property.

Indian tax deduction of up to INR 1.5 lakh per year for specified savings and investments under the Old Tax Regime.

UK personal pension with broad investment choice, tax relief on contributions, and a 25% tax-free lump sum at retirement.

UK property purchase tax paid by the buyer, charged on a slab basis above a tax-free threshold (currently GBP 125,000 in England).

Flat deduction of INR 75,000 (New Regime) or INR 50,000 (Old Regime) from salary income, available to all salaried taxpayers and pensioners.

US tax rule that resets an inherited asset's cost basis to its fair market value at the date of death, often wiping out decades of taxable gain.

Indian system where the payer deducts a specified tax percentage at the time of payment and remits it to the government on the payee's behalf.

Core finance principle that a dollar today is worth more than a dollar tomorrow because today's dollar can be invested.

Pre-tax US retirement account where contributions are tax-deductible and withdrawals are taxed as ordinary income.

An IRS rule that disallows a capital loss if you buy a 'substantially identical' security within 30 days before or after the sale.