Steps to attaining FIRE in India - long term tax advantage

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 The quicker you start your financial journey, the better you are of reaching FIRE as time will be on our side, compounding our capital. There are many blogs out there that are based out of US that guides us to FIRE, but for people in India, we don't have same government policies that are present in US like 401k, Roth IRA, etc.

This blog is entirely dedicated to Indian FIRE. Below are the instruments through which FIRE can be achieved in India.

EPF:

EPF stands for Employees Provident Fund. This is controlled by central government by organisation called Employees Provident Fund Organisation. If you are employed in organised sector you will be automatically enrolled if the organisation you are working in opted for EPF for employees retirement benefits.

This is the safest investment as it is gaurenteed by Central government of India.

The magic of compound interest can be seen in this, where in interest of previous years EPF and current account balance will be added and current year interest is given. 

 Returns are fixed, so for investors who don't like volatility can consider EPF as investment vehicle as the returns are not subjected to market risks.

You can claim tax deductions under 80c for this. The total effective real rate of return (including taxes, inflation) is higher than any fixed deposits offered by banks. 

To employees whose employer doesn't offer EPFO can still avail same functionality by joining PPF.

Atal Pension Yojna:

Atal Pension Yojna (APY) is flagship scheme launched by government of India focused on unorganized sector which doesn't have any welfare pension scheme by their employers. In this, individuals will receive a pension of 1000,2000,3000,4000 or 5000 depending on the contribution amount and on death of APY corpus amount will be returned to the nominee

Money collected from APY is then deposited into NPS account. PRAN number is generated for this. You can open APY in any bank account.

 
NPS:
National Pension Scheme(NPS) is tax efficient way of investing. We will get tax exemption of additional 50000 on our income tax returns. The difference between EPFO and NPS is, return percentage is fixed in EPFO, while in NPS, it is subjected to market risk.
You can automatically let the NPS choose what percentage should be in debt and what percentage should be in equity or you can fine tune your investment on the percentages of equity, government bonds, and corporate bonds to be allocated. As NPS is market linked and has equity portion of it, generally they outperform EPFO.
You can open NPS online in 15 minutes using the link below
https://enps.nsdl.com/eNPS/OnlineSubscriberRegistration.html?appType=main

Equity Linked Savings Scheme:
In this scheme, we are allowed to invest in direct equities and about 1.5 lakhs rupees is tax deductible.
In this, returns on investment about 1 lakh is excepted from LTCG(Long Term Capital Gains) tax. And any dividend amount greater than 5000 per year is deducted under 10% income tax rate.
The investment is frozen for three years. You don't have even options of changing the fund during this tenure.
Returns are not guaranteed. This Investment is subjected to market risk. 
Picking up right investment fund might be daunting task as no two funds are same.

Above mentioned Schemes are for long term. You will not enjoy fruits of your return immediately. For short term schemes click here.

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