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What Is NPS?
The National Pension System (NPS) is a pension system in India that ensures a steady stream of monthly income for citizens post-retirement. Along with retirement benefits, the scheme has many tax benefits. NPS is considered a low-volatile and safe investment scheme introduced by the government of India.
Applying for NPS online is a hassle-free process. Prerequisites include:
- You should be an Indian citizen between 18–60 years of age.
- You should not have a pre-existing NPS account.
I chose Canara Bank as my PoP (Point of Presence) to apply for NPS online. You can do it directly through the NPS website as well.
This page focuses on online NPS applications via Canara Bank Netbanking.
You are required to specify your preferred account type and investment scheme at registration. It is recommended to research the NPS options available before starting the registration process.
NPS Account Type and Investment Schemes
There are two ways in which contributions can be made to the NPS account:
- Individual: You can choose to be an individual contributor to your NPS account. This means you are solely responsible for contributing funds to your NPS account.
- Corporate: If your company has enrolled in NPS, they will take the necessary steps to convert your individual NPS to corporate NPS. With the corporate scheme, your company will contribute to your NPS account. If you register as a corporate subscriber, you need not pay your initial contribution.
There are two types of NPS accounts:
- Tier 1: With this account type, you can save for retirement and get tax benefits. Your corpus is locked in till you are 60 years of age. As a retiree, you can withdraw up to 60% of your accumulated funds. Annuities are purchased with the remaining 40% of the corpus to ensure a regular monthly income stream. If claiming tax benefits is your goal, the Tier 1 account would be apt. Tax deductions of up to Rs. 1.5 lakhs are available under 80C for NPS Tier 1 and up to Rs. 50,000 under 80CCD (1B) for NPS Tier 2.
- Tier 2: It is mandatory to have a Tier 1 account to open a Tier 2 account. There is no lock-in period with Tier 2 accounts, but there are no tax benefits. If tax saving is not your goal and you are looking at NPS purely as a retirement instrument, the Tier 2 account would be apt.
There are two NPS registration modes:
- Aadhaar Paperless Offline eKYC-based registration
- Permanent Account Number (PAN) based registration
Choose your desired registration mode. The Aadhaar paperless method is (as the name implies) conducted entirely online.
Once you have decided on the contributor and account type, you can choose your pension fund scheme. There are a number of companies involved in managing pension funds for NPS. These include:
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- HDFC Pension Fund Management
- ICICI Prudential Pension Fund Management
- Kotak Mahindra Pension Fund
- SBI Pension Fund
- LIC Pension Fund
- UTI Retirement Solutions
- Aditya Birla Sunlife Pension Management Limited
Pension fund selection is discretionary. You can select a fund manager after doing some basic research online.
The next step is to choose how your funds should be allocated:
- Auto: This is the most hassle-free process. If, like me, you do not wish the headache of manual allocation of your funds to equity, corporate debt, government securities, and alternative assets, go for this type. The fund manager automatically allocates the funds based on age and risk profile. You can specify your risk profile by choosing one of the three modes: aggressive, moderate, or conservative. The 'Aggressive' mode invests more in equity than other modes—the allocation changes per your age group. For example, someone nearing retirement will have less equity compared to those in their 20s. This is because equity means more risk, and your risk-taking capacity is assumed to reduce as you age.
- Active: If you want total control over how your funds are allocated in equity, corporate debt, government securities, and alternative assets, go for the 'Active' mode. You can specify the percentage of funds that should go into each asset. But since NPS is a retirement scheme, the percentage of funds allocated to equity is restricted. This means you cannot hold 100% of your funds in equity. Active funds allow you to maintain 75% equity exposure until you turn 50.
Tax benefits are only available for Tier 1 accounts.
- Under Section 80 CCD (1), NPS subscribers are eligible to claim a tax deduction of up to 10% of their gross income within the overall threshold of Rs. 1.5 lakh under Section 80 CCE.
- An additional deduction is available to NPS subscribers under subsection 80CCD(1) for investments up to Rs. 50,000 in NPS (Tier I accounts).
Now that we have the basic knowledge required for NPS registration (contributor type, account type, registration modes, and pension fund manager), we need to keep the required information and documents ready for registration:
- An active mobile number and email address.
- A netbanking account with one of the banks linked with the payment gateway provider.
- Scanned signature in JPEG format, with a file size between 4KB and 5MB.
- Scanned copy of PAN and canceled cheque in JPEG format with a file size of 4KB–2MB each.
- A minimum amount of Rs. 500 should be set aside for initial contribution via the net banking facility.
Before You Begin
For paperless Aadhaar authentication, you need to download a zipped authentication file from the UIDAI government website.
- Go to: https://resident.uidai.gov.in/offline-kyc.
- Validate your Aadhaar for offline paperless Aadhaar authentication.
- Enter a share code and download the zipped file.
This zipped file can then be uploaded at the time of NPS registration to complete Aadhaar-based authentication.
How to Apply for Canara Bank NPS
- Log in to your Canara Bank Netbanking Account
- Go to: Services > Others > NPS.
- Click on registration.
- Choose Aadhaar verification mode.
- Upload the ZIP file generated and enter the share code.
- You are taken to a form where you can enter details. When you enter the basic details, you will get an Acknowledgment Number. If you wish to complete the process later, use this Acknowledgement Number after selecting 'Complete Pending Registration' on the Registration page.
- Upload your signature file. For Aadhaar authentication, you will not get the option to upload a photo.
- Card details can be sent via email or physical address (option to get either card or ePRAN). Choose one. Both are treated as valid proofs. The physical card option is charged more than ePRAN.
- Make payment. This might get tricky because the payment gateway can get stuck, OTP might not be sent, etc. Try later using your acknowledgment number on the 'Complete Pending Registration' page.
- You will get your ePRAN and welcome kit through email.
- OTP Authentication or eSign should be done next via the registered mobile phone number or email address to complete your registration process. PRANs will "freeze" temporarily if they are not authenticated within 30 days of allotment. It can be reactivated on the OTP Authentication/eSign of the application form.
- Once eSign is complete, you can download your NPS form.
- You will probably receive an email about resetting IPIN/TPIN (Internet Banking PIN/Telequery PIN) on the same day (as I did). However, you should wait a few hours before doing it to avoid getting an "unauthorized user" error on NSDL.
- Reset IPIN on https://cra-nsdl.com/CRA/, log in using your PRAN as the User ID, and enter the new password.
- Initially, you might not see your payment reflected in your NPS account. Wait for a few days (4-5 days) and then check.
- Call the Toll Free number 1800 222 080 to set your TPIN. Input PRAN as the User ID and press 2 for "Reset of TPIN" (it is primarily used for setting the TPIN instead of resetting). The subscriber care executive will help you in setting your TPIN. You can use this TPIN later to contact customer support via phone.
- IPIN and TPIN will not be sent physically.
I got IPIN/TPIN email on the registration day within a couple of hours.
I registered in the morning, got the email in the afternoon, and was able to set my IPIN in the evening. TPIN setup might take a couple more days. You can try calling the number, but the IVR might say your PRAN doesn't exist.
After 4-5 days of registration, I got an email and SMS about the units allotted. When I tried setting up my TPIN after that, it worked.
To set up TPIN, call the customer care toll number 1800222080. The agent will guide you in setting up the 4-digit TPIN. This PIN can be used at the time of contacting customer support for any NPS-related query.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2022 Kalpana Iyer