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What is a Demat Account For Minors?

If you wish to trade in shares, you need to have a Demat account. Generally, any Indian citizen above the age of 18 years can trade in company shares.

 

The Indian Contracts Act of 1872 refrains any authority to enter into a financial contract with a minor. However, there is a duality here as the Companies Act of 2013 allows every citizen to hold shares, irrespective of their age.

 

Hence, parents or guardians can open a Demat account for minors to teach their children about the nuances of investment. The earnings from these accounts are added to the guardian’s income. Hence, they are free from any tax implications. 

 

Legally, the minor is the owner of the Demat account, but they cannot buy or sell shares. Instead, parents or guardians can transfer shares to a Demat and trading account for minors. Moreover, there is no minimum age to open a Demat account.

How to Open a Demat Account For Minors?

To open a Demat account for minors, follow these steps:

 

  • Step 1: You need to get a Demat account opening form from your Depository Participant (DP)

  • Step 2: Fill in the form with accurate details of both the guardian and the minor

  • Step 3: Submit this form to the DP with two separate KYC forms

     

Note that all the forms and other documents must carry the signature of the guardian. 

How is a Demat Account for a Minor Beneficial?

When you start an account for minors, it aids in better financial planning. With mutual funds generating potential returns, even guardians and parents can plan their kids’ finances better. Your child can save these funds to be used later for their education or any other purposes.

 

Apart from this, it helps your kid understand the essence of financial independence. Once they are involved even passively in the stock market world, they can easily develop essential life skills necessary to survive in this world.

 

In conclusion, Demat accounts for minors are a great financial instrument to teach your kids about investments and financial planning. In addition, it lets you plan better for your child’s future. The process to open a Demat account for minors can be completed easily online. 

What are the Reasons to Open Demat Accounts for Minors?

You can complete the process of opening a Demat account for minors online, which is quick and hassle-free. In addition to this, starting a Demat for minors can reap two-fold benefits, which include:

 

  • Stocks and mutual funds generally provide higher returns and are a great investment avenue. Parking your funds in Demat accounts for minors allows you to plan better for your children’s future financial needs. 

  • Demat accounts for minors help guardians teach their kids about financial planning. It is an important lesson for the kids to learn about financial independence and attain the skills needed as they grow up. 

Documents Required for Opening a Demat Account For Minors

 

In case of a minor, their account will be operated by their guardian until they become a major. The guardian must be their father or mother. In case both the parents are unavailable, the court will appoint their guardian. 

 

However, you will have to furnish some documents in order to open a Demat account for minors. These include:

 

  • Demat account opening form

  • Photographs of the minor and the guardian

  • Copies of the PAN card of both the minor and the guardian

  • Proof of address in the form of Aadhaar, bank passbook, passport, bank statement, driving license, and Voter ID (last two for the guardians)

  • Bank statement for the last couple of months

FAQs on Opening a Demat Account For Minors in India

Under the Indian Majority Act of 1875, any person below the age of 18 years is considered a minor.

Guardians can open a Demat account for minors in their children’s name.

Parents or guardians operate a Demat account for minors until the child attains the age of 18 years.

A guardian can either be a parent or a court-appointed guardian.

When a minor becomes 18 years of age, the minor Demat account becomes a non-operational one. Then, the individual needs to provide a fresh application form for opening a new account along with supporting documents.

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