Let’s admit it, us Indians have been teaching our children better spending and saving habits from a very young age. Be it by decreasing their expenses or have them save pennies in piggy banks, we have done it all. To all the people trying to teach their young ones some better spending and saving habits, here is a news for you. It is legal in India for a minor to trade and invest in the share market. A minor is essentially an individual who has not reached the age of 18. But in order to be able to dabble in the share market, a minor needs to have an active Demat account in his or her name. A Demat account is an account that allows the account holder to save their shares and securities in an electronic format. But there is a condition attached to a Demat account belonging to a minor, the formalities of opening the account and operating it needs to be conducted by a guardian on behalf of the minor. The guardian can either be the natural guardian, i.e. mother or father, or a court-appointed guardian. Having an active Demat account makes share trading and investing easy.
How to open Demat account for minors?
The procedure of how open a Demat account for minors is rather simple. And it is similar to that of opening a regular Demat account. You need to submit a few documents that are mandatory for verification. The list of documents is as follows:
- Identity Proof
- Address Proof
- Age Proof
- Photograph
In the wake of filling the standard account opening form, the KYC formalities of establishing identity and address must be finished for both the minor and the guardian. All the documents need to be signed by the guardian. Furthermore, the age of the minor should be given obligatorily and ought to be upheld by documentary proof that has been provided. Every one of these records should be submitted to the Depository Participant. The submitted details are then verified. When the confirmation procedure is finished with no complexities, the Demat account is then made. The charges for opening the account and maintaining it fluctuates with every brokerage firm.
There are a few limitations that come along with opening a Demat account for minors.
- Trading in options such as equity intraday, currency derivatives (F&O) and equity derivatives (F&O) is not allowed for a person operating from a minor account.
- A Demat account in name of a minor can’t have a joint holder.
- Sale or purchase of only Delivery Shares is allowed through the Demat Account of a minor.
- The Demat Account of a minor cannot be linked to a Trading Account.
What to do when the minor becomes an adult?
After becoming an adult, the minor needs to present another KYC and account opening form. After agreeing to the terms and conditions, the guardian’s particulars will be erased from the account and get supplanted with the signature and particulars of the account holder. On the off chance that the word minor shows up in the name under which the first account was opened, at that point the current account must be shut and another account is opened. When the process is finished, the depository participant will move the possessions from the first Demat account to the new account.
What to do in case of the guardian’s death?
- Submit a copy of the Notarized original Death Certificate of the deceased.
- If the death certificate is downloaded from an online portal, it needs to be verified by the Depository Participant.
- After the process is completed, the minor’s account will be frozen until the documentation of the new guardian is submitted, verified and approved.
A Demat account in the name of a minor is an excellent option to safeguard the future of a child. We suggest that you open one for your child today.