Investing is an important life-skill - and it is never too early to teach this to your children. Today we have a variety of options to plan our finances, and thanks to digitization - very convenient ways to start investing. If you would like to introduce your child to equity investments, or would like to lay the foundations of their future wealth by trading in securities - then you must begin by opening a demat account for them.
A minor’s demat account can be opened for any individual below the age of 18 years (in India).
Opening an account in the name of a minor is similar to opening a regular demat account. However, do remember that a minor cannot trade from this account. As per Sebi:
“A minor cannot enter into a contract with a stock broker to purchase or sell any security. However, a trading account in the name of a minor can be opened only for the sole purpose of selling of securities possessed by the minor by way of investment in IPO, inheritance, corporate action, off market transfers under the following reasons:
- Gift / Donation
- Transfer between family members
- Implementation of Government / Regulatory Directions or Orders”
A minor’s demat account will be operated by the natural guardian till the minor becomes a major. Natural guardian refers to a child's mother or father (biological/adopted) who has the legal right to make certain decisions for a minor child.
Lets take a quick walk through of the process of opening a demat account for a minor at Angel One.
Only Physical Applications: At present, you need to complete the application process via offline mode only. Hence all your documentation will have to be submitted in print format only. However, once the account is activated, you can continue to enjoy all the online features offered by Angel One.
- Download & Fill the Application form
- Prepare a set of all supporting documents
- Send the filled form and the documents to: Angel One Ltd. Osman Plaza,6-3-352, 2nd Floor, Road -1, Banjara Hills, Hyderabad -500034.
Important Points to Remember during application:
- Signature: All signatures in the application must be that of the guardian only. The guardian needs to sign the application on behalf of the minor. This includes self-attestation of all the documents as well as the endorsement across the minor’s photograph.
- Photographs: As a KYC requirement photographs of both the Minor as well as the Guardian will be required
- Dual KYC:
- Minor’s details need to be filled out on the 1st page of the KRA form. The guardian needs to sign across the Minor’s photograph on this page
- Guardian’s details need to be filled on the 2nd page of the KRA form
Get these Documents Ready before you start your application
When the Minor reaches 18 years of age
Once the minor reaches 18 years of age, the minor will need to raise a request with Angel One to convert the demat account into a normal (major’s) demat account. Documents that need to be submitted include:
- Pan Card
- Address Proof
- Bank Statement
Once confirmed, the guardian’s details will be deleted from the account and his signatures will be replaced by that of the minor (now turned major).
In case of the guardian’s death
In the extremely unfortunate situation of the death of a guardian operating such a minor’s demat account, an application for change of Guardian needs to be submitted to Angel One.
This application will need to also have the old guardian’s death certificate along with the usual list of documents needed (as detailed above).
Opening a demat account for your child will help him get an early exposure to the idea of investment. It will also help you segregate the funds you want to allocate for them. However, probably the first step to complete before you embark on this initiative is getting a PAN Card for the minor and a functioning Bank Account. Also, speak with your financial advisor to understand in detail the guidelines and laws governing investments done in the name of minors before taking any financial decision.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on Investment or recommend buying and selling any stock. Account would be opened after all procedure relating to IPV and client due diligence is completed.
FAQs related to Demat accounts for minors
Who qualifies as a minor?
Any person under the age of 18 is considered a minor in India, and a Demat account can be opened in his/her name.
Who is eligible to be a guardian?
Only either of the parents or a court-appointed guardian is eligible to be the guardian of a child when opening a Demat account.
Who is responsible for filling the Demat account opening form?
Demat account opening forms must duly be filled and signed by the guardian along with two separate KYC forms (for the child and the guardian).
What are the documents required while opening a Demat account for a minor?
The PAN details of the guardian, as well as the child, are mandatory, and so is the proof of birth of the minor. Additionally, proof of identity and proof of address of the minors is required.
It is the responsibility of the guardian to fill and provide all the documents necessary for account opening.
Who should operate the account?
The operation of the account has to be carried out by legal guardian.