Understanding Demat Account for Minors

A Demat account is necessary for investing in shares, ETFs, IPOs, MFs and more. Parents who want to invest in shares in the name of their kids should open a demat account for minors. However, remember that minors cannot purchase or sell stocks on their own.

 

The guardian can purchase stocks and transfer them into the minor's account. For this, it is important for you to learn how to transfer shares from one demat to another online.

 

Documents Required for Opening Minor's Demat Account

Opening a demat account for minors necessitates submitting documents of both parent and child.

• PAN of the minor and parent or guardian.
• Address proof of the minor and parent or guardian. Documents accepted are Aadhaar, passport, driving license, and voter ID card of the parent.
• The minor's birth certificate needs to mention the minor's birth date and parents' name.
• Parents must undergo the KYC process.
• The bank account of the minor is mandatory to receive redemption/sale proceeds.
• It is essential to have a bank account in the child's name at the time of redemption.

Irrespective of the source of the initial investment, the redemption amount will go to the minor’s bank account only.

 

Things to Know about Opening a Minor's Demat Account

Here are the top factors you must know when opening a Demat account for minors:

• Online demat account application for minors requires you to complete the e-KYC process. 
• The parent must sign the demat account opening form on behalf of the minor.
• Photos of both minors and parents are required.

Another critical aspect for parents or guardians to keep in mind is learning how to transfer shares from one Demat to another online, which can become a necessity for portfolio adjustments. Additionally, knowing how to find Demat account number from PAN can help in tracking or resolving any account-related issues.

 

Benefits of a Minor Demat Account

Demat accounts for minors can be extremely beneficial for planning the finances of a child from a very early age. Here are the top benefits of a demat account for minors you must know:

1. Planning Your Child’s Future Expenses

From medical expenses to college fees, parents have various presets for expenses. A demat account for a minor helps them segregate the funds that are only meant for their children’s education, wedding funds, relocation for jobs, and other expenses.

 

2. Financial Literacy for Your Kids

Reports show that only 24% of the total population in India are financially literate. Having a Demat in your child’s name explains to them the basics of savings and investment from an early age. This gives them a great understanding of planning their expenses and managing their wealth.

 

Limitations of Minor's Demat Account

The main limitations of the minor's demat account are as follows:

• Control of the Demat Account: The minor’s demat account is operated by a parent or legal guardian till the minor becomes an adult.
• Restricted Participation: Minor cannot buy or sell stocks on their own.
• Indirect Participation: A demat account can only receive and sell securities held in the demat account. The securities can be received by way of gift inheritance or legal order.
• No Joint Accounts in the Minor’s Name: Joint holding in a minor’s demat account is not allowed due to different registration processes and regulations.

 

Conclusion

Opening a demat account for a minor is a great way to start their financial journey. This approach is safe and simple as it is managed by a parent until the minor reaches an age where he can use judgments to actively manage his wealth.

Open a demat account for your minor with Almondz Trade. From investing in the stock market to 'how to find demat account number from PAN', it makes investing simpler and more accessible.