How to Open a Minor Demat Account?

Do you want to gift your child some shares of your favourite company? Or do you want to secure your child’s future by investing in some mutual funds? Have you ever questioned yourself, ‘Can I open a demat account for a minor?’ If yes, then you need to know how to open a minor demat account in India.

A demat account is an essential requirement for anyone who wants to trade or invest in the Indian stock market. It allows you to hold and manage your securities in a digital format. But what if you want to open a demat account for your child who is below 18 years of age? Is it possible? 

The answer is yes! 

But how can a demat account be opened for a minor?

Let us take a look!

What is A Minor Demat Account?

 A minor demat account is an electronic account that allows a person below the age of 18 years to hold and manage securities, such as stocks, bonds, mutual funds, etc., in a digital format. 

A minor demat account is similar to a regular demat account. 

However, a minor cannot open a demat account himself. It should be opened by their parent/guardian.

Minor demat account has some special features and restrictions. 

How to Open a Demat Account for Minor?

Here’s how you can open a minor demat account in a few steps with Shoonya:

1. You can reach out to the Shoonya trading platform via a Live Chat, email ([email protected]), or call Sales at +91 9098001001.
2. Once you connect with the team, you will receive the minor demat account opening form in your email. 
3. Simply print it out, fill in the details, sign it, and send it to the below address:

Finvasia Center, Plot no. D-179, Industrial Area, Sector 74, Sahibzada Ajit Singh Nagar, Punjab 160055

3. Required Documents to open demat account for minor in India:
   • Birth certificate of the minor
   • PAN card of the minor
   • Address proof of the minor
   • Bank proof of the minor (Cancelled cheque, passbook, or bank statement)
   • PAN card of the guardian
   • Address proof of the guardian
   • 1 photo of each of the minor and guardian

Please remember: This minor demat account account is solely for transfer purposes. 

Trading (buying or selling) is not allowed.

Minor Demat Account in India: Key Things That You Must Know 

•  A minor demat account can be opened by the parent or legal guardian of the minor. He/she will act as the primary party responsible for transferring shares to the demat account of a minor as a gift.

•  A minor demat account cannot be used by the minor to buy or sell shares on their own, as per the Indian Contracts Act of 1872. 

•  A minor demat account requires the KYC (Know Your Customer) details of both the minor and the parent or legal guardian. 

The documents required for minor demat account opening are proof of identity, proof of income, proof of address, proof of bank account, PAN card, and photographs of both the minor and the parent or legal guardian.

•  A minor demat account can be converted into a normal (major’s) demat account once the minor attains the age of 18 years. The minor will have to submit a new application form, a new agreement, and updated KYC details to complete the minor demat account conversion process.

What are the Benefits of Opening a Minor Demat account?

Some of the benefits of opening a minor Demat account are:

•  It allows parents or guardians to plan and save for their children’s future financial goals, such as education, wedding, relocation, etc.

•  A minor demat account introduces children to the world of financial literacy and independence. Hence, teaches them the concepts of saving, investing, and compounding.

•  Demat account for a minor enables the transfer of securities to the minor’s account as a gift, inheritance, or corporate action without any tax implications.

What Happens to the Demat Account When a Minor Turns Major?

When a minor turns 18 years old and becomes a major, he or she has two options:

• Close the minor Demat account and open a new one in their name, transferring all securities from the minor account without incurring any charges.

• Convert the minor Demat account into a major Demat account by signing a new agreement with the DP or broker and completing the KYC formalities. 

This process involves deleting the guardian details granting the minor full control over the account.

Some Common Queries Related to a Minor Demat Account 

Here is a list of common things that you need to know about opening a minor demat account in India:

Can I open a demat account for a minor?

Yes, you can open a demat account for a minor if you are his parent/ legal guardian.

You will need to provide the KYC details and documents of both the minor and yourself and sign the agreement as the primary party.

Can a minor open a demat account?

A minor cannot open a demat account on his or her own, as per the Indian Contracts Act of 1872. However, a minor can own shares in publicly listed companies, as per the Companies Act of 2013. 

Therefore, a minor can have a demat account in his or her name, but it has to be opened and operated by the parent or legal guardian of the minor.

Can a demat account be opened for minors?

Yes, a demat account can be opened for a minor, but it has to be opened and operated by the parent/ legal guardian of the minor until the minor becomes a major.

Conclusion

Opening a demat account for a minor is possible. You need to just follow the procedure and exact guidelines. It’s a smart step to secure their financial future and teach them about money early on. Plus, when they grow up, they can take charge of their investments smoothly.

FAQs | Minor Demat Account in India

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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.