Subsequently, the Pension Fund Regulatory Authority (PFRDA) accepted permanent account number (PAN) and a bank-based KYC to open NPS accounts online. Since then, the courts have allowed the use of Aadhaar for eKYC but only if the customer prefers this method.

On 17 February 2016, PFRDA decided to allow the use of Aadhaar as e-KYC, which makes opening an account online much simpler.

"When we launched eNPS earlier on a pilot basis, we allowed for eKYC through Aadhaar card. But we had to discontinue after the Supreme Court restrictions on the use of Aadhaar as eKYC. Now that it has been clarified that it can be used as per customer's choice and that it should not be made mandatory, we have allowed Aadhaar to be used as eKYC, through which a subscriber can open an NPS account instantly online," said B.S. Bhandari, whole time member, economics, PFRDA.

"Now one can use either Aadhaar or PAN and bank account for online registration under eNPS," he added.

Offline process

The offline process starts with finding a point of presence (PoP). These are intermediaries such as banks that help you subscribe to NPS, carry out KYC verification and also receive NPS contributions from you. There are about 63 PoPs, and almost all the bigger banks provide this service. See the full PoP list on http://bit.ly/1TlvCxJ .

You need to fill up a subscriber registration form to open an account (get the form here: http://bit.ly/1QBjK8k ). You need to fill in details about yourself, your bank account number, choice of pension fund manager and asset allocation.

You also need to submit all KYC documents (not needed if opening through your bank) and make a contribution. The minimum contribution is Rs.500, and you need to invest at least Rs.6,000 every year. A permanent retirement account number (PRAN) is generated and sent. This is a unique portable number that will remain with you under NPS.

Your welcome kit also contains various passwords, which you can use to access your account through the call centre or online on the Central Record-keeping Agency (CRA) website.

PoPs get paid from the contributions you make. There is a one-time charge of Rs.125, called the subscriber registration charge, for account opening.

Then a charge of 0.25% of the amount received from the subscriber will apply on all transactions subject to a minimum of Rs.20 and maximum of Rs.25,000. Non-financial transactions or those that do not involve a contribution from the subscriber will cost Rs.20 per transaction.

Online process

You can open your online account by going to www.npstrust.org.in and then going to e-nps.

You will need to register and there are two ways of doing it. One is using your PAN and bank account details and the other is using Aadhaar.

To subscribe online, you need to have a mobile phone number, email ID and a bank account with Net banking facility.

The process of registration is the same as the offline process in terms of the information needed, but if you provide PAN, you will also need to give a bank account which the authorities can tap for your KYC.

PFRDA has about 15 empanelled banks and only if you have a bank account with any of these can you avail the PAN plus bank verified-KYC to open your account online.

Currently, 17 banks have agreed to do the KYC verification for eNPS wherever the subscriber has given PAN and bank account details. Fifteen banks have already started doing it. We are in talks with other banks also to operationalise this. Opening eNPS through PAN and bank account needs verification of the subscriber's address as the address proof is not available through PAN. So, we have clubbed PAN with a bank account. If the subscriber has a bank account with an empanelled bank, then the bank verifies the KYC details.

In the online process too, you need to contribute at the time of registration and any subsequent transaction is possible after the KYC details have been verified by the bank. For KYC, banks will charge you a one-time fee of up to Rs.125 (plus applicable taxes) and this will be debited from your bank account by the bank as KYC authentication charges.

The process may be cumbersome as you may not have your account with an empaneled bank or KYC details may not match.

Opening eNPS account using PAN and bank account involves the intervention of banks, which could sometimes cause delay as the banks have to verify the KYC details. Sometimes, details may not match with the bank's records.

In about 25% of the cases where PAN and bank account have been used for KYC, the process has not been smooth due to delay in verification by banks and or mismatches in what's available with banks and the address given by the subscriber on her eNPS form

In the second method, you start by keying in the Aadhaar number. A one-time password (OTP) will be sent to the Aadhaar-registered mobile phone number. Once the OTP is verified, you will have to fill up information such as your bank details, and also make an initial payment. Do remember that to open an account online, you will need to scan and upload a digital signature and also a photograph. If you are using Aadhaar, then a photograph appears automatically, which you can change with another one.

Again you need to make a contribution. "Before eNPS, a subscriber could contribute through facilities like cheque, ECS (electronic clearing service) and NEFT (National Electronic Funds Transfer). Now, through eNPS, a subscriber has the option to invest online. No PoP charges will apply but there will be payment gateway charges, which can be high for credit and debit card transaction. For Net banking facility, it's just 60 paise," said Sumit Shukla, chief executive officer, HDFC Pension Management Co. Ltd.

The process, however, doesn't stop here. You have to print the NPS form that was filled online, paste a photograph, sign the form and submit the print out within 90 days to the CRA. Currently, National Securities Depository Ltd (NSDL) is the CRA. If you don't send the form, your account will be 'frozen' temporarily.

If you already have an account, you can make use of the e-NPS facility to contribute online.

Such contributions can only happen through e-NPS, else it's via NEFT, cheque, among other payment options.

The convenience of opening an NPS account online is a welcome move, although it still encapsulates an offline process of having to send the physical form. As of 17 February, 2,411 online NPS accounts had been opened using the PAN plus bank account method, and 2,573 accounts were opened using the Aadhaar route, according to PFRDA data.

Make use of the process if you plan to open an NPS account. It is a low-cost investment plan for your retirement years and the Budget announcement have made the tax treatment more favourable.