With the Indian economy expanding faster every day, learning about investment is a vital life skill. Not only adults but also children can enter the stock market world.
If you want to introduce your child to equity investments, or trading in securities, you must begin by opening them a minor Demat account online. You can free Demat account for minors for any individual below 18 years.
Opening a minor Demat account online is similar to a regular Demat account. However, there are some rules and regulations to follow strictly.
- Demat account for minors will get supervised by their parents or guardians till the minor becomes major
- The minor cannot get added as a joint holder in the Demat account
- A Demat account opened in the name of the minor is used only for the sole purpose of the sale of securities that the minor has possessed by the way of investment in IPO, inheritance, corporate action, and off-market transfers such as:
- Gift/ donation
- Transfer between family members
- Implementation of Government/ Regulatory Directions or Orders
What is the process of opening a minor Demat account online?
To open a Demat account for minors, you will need a stockbroker website registered with CSDL and NSDL. The broker will ask for basic details like name, email ID, contact number, and much more.
Then you have to fill in the KYC (Know Your Client) details of the minor and the guardian.
Documents required for Opening Minor Demat Account:
- Minor birth certificate
- Proof of address for minor (Aadhar card)
- Minor bank statement
- Proof of address (Aadhar card) and proof of identity (PAN card) of the parent or guardian
- Bank account details of the parent or guardian
- Photographs of both the minor and the guardian
After submitting the documents, the broker may conduct an in-person visit to confirm all the provided details. Upon satisfaction, the Demat account for minors is opened.
When the minor turns 18:
Once the minor reaches 18 years of age and turns major, the Demat account ceases to operate. He or she must submit a new Demat account opening application form attached with the required documents. You do not require the signature of your parent or guardian for the regular Demat account. The securities and shares will get transferred to the new account, and the account holder can invest and trade in all segments.
- PAN card
- Address proof
- Bank statement
In case of the guardian’s death:
In the unfortunate situation of the death of the guardian operating the minor Demat account, applying to change the guardian can be submitted to the stockbroker.
The Death certificate of the old guardian, the application form, and the above-listed documents are sent to the stockbroker.
Benefits of a minor Demat account:
Here are some benefits of opening a minor Demat account online
Better financial planning:
Mutual funds and equity shares provide better returns than any other form of investment instruments. The parent or guardian can make a better plan for their child’s finances with the help of a minor Demat account. You can use the account to save money for the child’s higher education, marriage, relocation to jobs, and much more.
Encourages financial stability:
A minor Demat account introduces the children to the literacy of financial independence. As they start to learn about the stock market, they develop vital life skills to survive in the present society.
Opening a minor Demat account online for your children will help them get early exposure to the idea of investment. It will also help you segregate the funds properly and allocate their part. The first step is to get a PAN card for the minor and maintain a bank account for them.
We hope that this article was helpful. Before making any final decision, consult with your financial advisor to understand the guidelines and laws governing investments for minors.