One of the first questions people often ask in the stock markets is can a minor open a demat account. After all, a minor is someone who is under the age of 18 and hence not competent to enter into contracts. However, you would be glad to know that a Minor can open demat account. In fact, you cannot do the minor demat account opening online in the same way as for adults. You can see how this process is done for minors.
There is no minimum age for demat account for minors. The only condition is that the minor should be under 18 years of age, and on reaching 18 the same needs to be converted into a regular demat account. So there is nothing like minimum age to open demat account. Here we shall understand the nuances of demat for minor and how to open demat account for a minor individual.
In this segment, we shall look at the meaning of demat for minor and how to open demat account for minor. These are persons under the age of 18. The process to open demat account for minor in India is actually quite simpler and only requires minimal documentation support. Since there is no demat account minimum age in India, it can be applied to anyone under the age of 18. You can also find out about the best demat for minors by check with friends and your advisor before you open minor demat account in India. That is a good point to set off on your minor demat account opening journey.
The Process Flow To Open A Demat Account For A Minor
At the outset, you must remember that while you can open a demat account in the name of minor, you cannot open a trading account in the name of a minor. The minor can hold a demat account under legal guardianship but cannot trade or invest in stocks. Minors cannot buy stocks into the demat account. However, the guardian can either transfer existing stocks in their demat account or buy stocks and transfer them into the minor’s account. Both are allowed, but the minor cannot buy on his or her trading account and then expect to get demat credit on T+2 day. That is not permitted.
Now for the steps to open demat account in the name of a minor. Firstly, all the forms and supporting documents of the minor should be signed by the guardian. The minor is not authorized to sign at any of the places in the demat account opening form.
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Documents Required To Open Demat Account For Minors
Here is the list of documents required for opening demat account for minor and these include the documents of the minor and the guardian in question.
- The account opening form must be duly filled up and submitted to the DP with all the supporting documents. The form should be filled in capital letters in clear handwriting and at all the relevant places, the signature should be that of the guardian of the minor. The minor cannot sign anywhere in the form.
- Interestingly, the minor has to also do the KYC (know your client) formalities by submitting the KYC form also for the minor. What does the KYC form of minor contain. You must mention details of the minor, paste the minor’s photograph but the signature across the photograph and in the necessary slots must be done by the guardian.
- Apart from the minor, even the guardian must undergo KYC. What is mean by KYC of the guardian. Even if the guardian is KYC compliant, the guardian has to fill the basic form, mention the details of the guardian and the relationship, paste the guardian’s photograph, and the guardian should sign across the photograph and also in the signature box of the form.
- If both the minor and guardian’s KYC is registered, then the KYC form, PAN and address proof copies need not be submitted at the time of the KYC at this stage. You can check your KYC status from the authorised agencies for the same.
- AN important part of the document submission is the PAN copy of the minor and guardian, and both should be signed by the guardian. If minor does not have a PAN, you must first apply for a minor PAN with the Income Tax Department by filling up Form 49.
- Submission of address proof is an important part of the demat account opening process for minors. You need to furnish the address proof of the minor and the guardian. For the minor, the address proof can be any of the following viz. Aadhar Card copy, passport, bank passbook or bank statement in the name of the minor etc. All these documents must be attested by the guardian. In the case of the guardian, self-attested copies of any of the following documents can be furnished viz. Aadhar, driving license, passport or voters ID.
- As the proof of identity of the minor, any of the following documents can be submitted viz. Birth certificate copy issued by the municipality, school leaving certificate, mark sheet issued by the higher secondary board etc. Normally, a school identity card is also accepted as proof of identity.
- The minor bank account would be a under guardianship (UG) bank account. However, still, a cancelled cheque or bank statement of the bank account in the name of the minor must be also enclosed along with the form. Some DPs may insist on the statement being signed by the bank officer with stamp.
- All these documents can be submitted self-attested photocopies. However, while visiting the DP office, the guardian must carry the originals of all the documents for verification by the relevant officer.
- The last step before activating the minor demat account is In Person Verification (IPV). In the IPV, both the guardian and the minor should be present in the same video while performing the IPV.
Some concluding thoughts. Does a minor demat account have a cost? There is no account opening charge, but minor demat account will have a cost in terms of annual maintenance charges (AMC). Normally brokers will collect the cheque for the first year AMC. In case the cheque is not given, all such costs would be debited to the trading account of the guardian.
Limitations Of Demat Account For Minors
Despite the fact that there is no minimum age for opening or trading with a Demat account, minors have some limitations. A minor cannot operate a Demat account on their own. If you want to open a minor Demat account, you'll need the parent's or guardians' documents. Additionally, a minor can only use a Demat account to trade equity. Neither equity intraday trading nor equity derivatives are allowed for minors. Lastly, a minor's Demat account can't be linked to an online trading account.
When A Minor Becomes A Major, What Happens To Their Demat Account?
As soon as a minor turns 18, his or her Demat account stops working. Thus, the account holder needs to fill out a new application for opening a Demat account. It won't need the guardian's or parent's signature like a minor Demat account. In the new account, the shares will be transferred and the account holder can trade or invest in all segments (subject to the stockbroker's approval).
Some Relevant Questions Pertaining To Minor Demat Accounts
- Who exactly would classify as a minor? As per the legal definition, a minor is any person under the age of 18. For minor, there is no minimum age, only maximum age.
- Who can be guardian to a minor? Under the extant rules, either of the parents (mother or father) or any court-appointed guardian is eligible to be the guardian of a child when opening a Demat account. India law does not distinguish between biological children and adopted children.
- Who should operate the demat account of the minor? The operation of the account has to be carried out by legal guardian only. The minor is only for benefits and cannot transact into the demat account.
- Who can transfer shares to the minor? Only the guardian is authorized to transfer shares into the demat account of the minor. Any benefits to the minor will be taxed as income in the hands of the guardian.
In India, minors can open Demat accounts, giving them a chance to start investing early. Despite the fact that minors can't open and manage their Demat accounts independently, their legal guardians can. The process requires specific documentation, including KYC for the guardian and the minor. Besides that, the Demat account for minors is limited to equity trading and can't be linked to an online trading account.
Upon turning 18, the Demat account can be converted to a regular account, allowing the minor to take full control of their investments. If you're considering opening a demat account for a kid, blinkX can help. It's easy and seamless to open demat accounts for minors with the blinkX demat app, ensuring a seamless experience of trading.
People under 18 are considered minors in India, and they can open a Demat account.
When opening a Demat account, only the parents or a court-appointed guardian can be the guardian.
In India, a parent or legal guardian can open a minor Demat account on behalf of a minor.
Having a minor Demat account lets parents or guardians transfer or gift shares to their kids for education, marriage, etc. Using it, parents and guardians can save for their kids systematically.
A minor needs a Pan Card and a guardian to open a Demat account. Proof of address, like an Aadhaar card or electricity bill. Minor's birth certificate Bank account details where the minor is a joint holder. You'll need two KYC forms - one for the minor and one for the guardian.