How To Open Demat Account for Minors?

It’s a good idea to set your child on the road map to financial independence as early as possible, as a juvenile cannot open a brokerage account on their own.

Parents can either set aside funds in their investment accounts for their children or invest in the minor’s name for more targeted investment.

It would be beneficial to understand how to begin investing as a minor and what options are available to you as a “Minor” in India.

What Does A Demat Account For Minors Do?

Minors can invest in the stock market by opening a Demat account. A guardian manages a minor’s Demat account, and there are numerous firms where you can open a minor’s Demat account. The Guardian has the authority to open, operate, and close the minor’s Demat account. For this, here is the procedure –

Account Opening Procedure of Minor’s Demat Account

The procedure for opening a Demat account for a youngster is very simple. This account, like any other ordinary Demat account, requires the submission of

  • PAN details of the guardian as well as the Minor
  • POB of the minor
  • POI of the minor
  • POA of the minor 

to the Depository Participant in concern. The DP confirms the minor’s details after receiving the relevant documentation. The minor’s Demat account is created after successful verification.

The guardian must fill out the required form with the KYC information for both the guardian and the child.

The DP will give a client ID and account number once the information has been confirmed.

Restrictions of a Minor Demat Account

The following are the limitations of a minor’s Demat account. It differs from a standard Demat account in the following ways:

  • A minor cannot hold a Demat account as a joint holder.
  • A minor Demat account cannot be linked to a trading account.
  • The guardian is responsible for managing this account until the minor attains the age of 18.
  • Cannot be used to trade equity intraday, equity derivatives, or currency derivatives
  • Only allows for the purchase and sale of delivery shares.

What Happens When Minor Turns Major?

1.    If the word ‘minor’ was mentioned previously:

It’s time to close the account. A new one can be opened in the name of the account holder.

2.    If the word ‘minor’ was not mentioned earlier:

A new account opening form and a KYC application must be submitted by the account holder. The new account holder will receive a copy of the agreement from the DP. The DP will remove the guardian’s signature from the account details. Instead, the new account holder’s signature will be required.

The DP will transfer the minor Demat account’s holdings to the new account holder of the Demat account.

What To Do In Case Of Death Of Guardian Of Existing Minor Account Holder?

If the guardian of an existing minor account holder passes away, the following procedure should be followed:

  • Submit the original/copy of the deceased Guardian’s Death Certificate, duly notarized or attested by a Gazetted Officer.
  • The account will be frozen until a new guardian is appointed.
  • All of the new guardian’s information, as well as a KYC application form, should be submitted.
  • Obtain a copy of the Rights and Obligations document from the DP after the new guardian has been approved.
  • Submit a new Nomination Form for the minor’s account along with the new guardian.
  • When a new guardian is approved after the AOF and documents have been verified, the CDSL system should be updated with the new information.
  • The deceased guardian’s POA data and signature should be changed with the new guardian’s signature.

The Bottom Line

When compared to conventional Demat accounts, the Demat account for minors offers greater perks. In addition, when you use a Demat account for minors, the transfer process takes less time. In the long term, opening a Demat account for a minor is beneficial. You can groom the minor to organize his finances in the future.