It’s said that age is just a number, and we agree. Apparently, SEBI and Company Act 2013 guidelines also agree with this sentiment because minors can open a demat account as well.
Investing in the share market is the most popular method for individuals to increase their wealth, especially in the current times of rising inflation and diminishing savings. Opening a demat account is a necessary prerequisite to investing in the share market. Minors can also take advantage of the lucrative opportunities offered by the market and improve their finances from a young age.
Features of a Minor Demat Account
A minor demat account is slightly different from a demat account for adults. Here’s how-
- For opening a demat account, the consent of a parent or guardian is required, and the sole authority of handling the account lies with the parent or guardian until the child turns 18.
- A minor demat account cannot be used to enter into an agreement with a stock broker for the purpose of the purchase of shares. The account can only be used to sell and store shares that the minor possesses as a result of transfers from family members, gifts/donations, and some corporate action.
- The minor demat account can be converted into a regular demat account once the child turns 18.
- You cannot trade in other securities like derivatives in a minor demat account.
Benefits of a Minor Demat Account
According to Angel One, a leading stock broker in the country, opening a demat account for minors has the following benefits-
1. Better alternative to other Children’s Plans
The returns on children’s plans offered by LIC, ABSL, etc. cannot compete with the wealth you can accumulate for your child by investing in the share market.
2. Financial Literacy
Opening a demat account for minors encourages children to learn about finances and their management from an early age. Investing in shares from an early age also helps generate interest in finance and trading.
3. Superior Financial Planning
You can secure your child’s future by investing in the share market and multiplying your wealth.
How to open a Minor Demat Account?
Angel One simplifies the process of opening a minor demat account and helps you plan your child’s financial future. Let’s look at the simple steps you need to follow to open a minor demat account-
- Minor demat accounts can only be opened in person. Therefore, you have to submit all documents physically in printed form. You have to submit the following documents-
- Application form
- Supporting documents mentioned in the application form
- Guardian’s PAN card and address proof
- Minor’s Pan card, birth certificate, address proof, and bank statement.
- The signatures submitted should belong to the parent or guardian only. You will undergo a dual KYC process, wherein you have to submit verification documents for the child and yourself. You also have to submit photographs of both parent/guardian and child.
- Once the account has been opened, you can avail all the facilities associated with it online.
And you’re done!
You can now segregate and earn funds for your child and give them the gift of a financially stable future.
Sources used:
- https://www.angelone.in/knowledge-center/demat-account/minor-demat-account
- https://www.sebi.gov.in/sebi_data/faqfiles/may-2019/1558004460882.pdf
- https://www.5paisa.com/stock-market-guide/demat/what-is-minor-demat-account
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