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How to open a demat account for minors in India: A guide to early investing
Minors can start demat accounts in India. But there are specific guidelines to follow. Learn more.

what is minor demat account

With the quick growth of the Indian economy, many individuals are considering making capital market investments to build wealth and earn profits. It is not, however, only for adults to participate in the stock markets. Along with their parents or guardians, minors under eighteen can also register a demat account and invest in the capital markets.

You can hold stocks and securities electronically with a demat account. It functions similarly to a bank account. To invest in capital markets, including stocks, bonds, mutual funds, and other financial instruments, you must have a demat account.

That being said, let’s look at how you can open a minor demat account and the procedures needed to do so. Let’s get started.

Also read: What is demat account: All you need to know?

Can a demat account be opened for a minor?

Yes, a minor can open a demat account. However, a guardian must operate it on their behalf until they are 18 years old. The guardian is usually the father or the mother in his absence. If both are not there, the court can choose a guardian. A minor cannot have a joint holder with anyone else in a demat account.

What is a minor demat account?

A minor demat account is an account that allows a person under the age of eighteen to own and manage shares. However, a minor can’t use the account independently. The minor needs a legal guardian or parent to create and supervise the demat account. 

The parents or guardians may also give shares to the minors as a gift and put them in their demat account. For this reason, the only person authorised to open a demat for minors is the child’s parent or legal guardian. The parent or legal guardian of the child should ideally have complete control over all decisions regarding the minor demat account until the minor turns eighteen. 

A minor demat account is an excellent way to introduce a minor to the capital markets and teach them about investing and saving money.

Who is eligible to register a demat account for minors?

In India, investors who want to keep their shares electronically after a purchase or sale must have a demat account. The National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the two major entities that manage demat accounts. Depository Participants (DPs) act as middlemen in buying and selling shares. 

Generally speaking, any Indian national older than eighteen may create a demat account. Non-resident Indians (NRIs), business entities, and joint investors may also set up demat accounts.

Minors are not permitted to sign or participate in monetary agreements under the Indian Contracts Act of 1872. But, according to the 2013 Companies Act, any citizen of India has the right to be involved in the share market. There is no minimum age limit for demat account holders.

However, minors cannot purchase or sell shares on their own, even if they are the legal owners of the demat account. They need their parents or guardians, who are responsible for creating and handling the account until they turn eighteen, to do that for them.

How to open a bank account for a minor?

Below is a detailed guide to opening an account for your child.

  • To create a savings account for your kid at a bank, you must already have one open in your name.
  • As a joint holder with the minor as the primary account holder, you must complete the form for establishing the account. In addition, you must submit this form with your photos attached. Some banks might also need a picture of the minor.
  • The birth certificate of the minor needs to be provided as identification of age. This is necessary to prove your connection with the minor as well as evidence of age.
  • Your PAN card is also required.
  • You may be required to provide your details on an additional form as the parent or legal guardian in this situation.
  • You must provide address verification for the youngster to the bank as well.
  • Lastly, to complete future transactions, the bank will need your signature.

The account will now be opened, and the bank will provide the relevant documentation after everything has been completed and validated. 

Also read: The best banks in India: Leading the way in finance

How do I open a demat account for a minor?

Opening a minor demat account does not require a minimum age, but you must follow a few specific procedures. Any online stockbroker associated with CDSL or NSDL may help you create a minor demat account. 

Before moving on to the next stage, the broker will ask for basic details like the name, email address, and phone number. The next step requires entering the minor’s and the parent or guardian’s KYC (Know Your Customer) information.

Here are the documents required to create a minor demat account.

PAN card of the minor:

Along with the application, the minor’s Permanent Account Number must be provided. To register and create a demat account in the minor’s name, the minor’s PAN and AADHAR card must be connected.

Additional required paperwork:

Along with the PAN card, identification and permanent residence documentation must be provided. There are two Know Your Customer (KYC) papers that must be turned in when opening a demat account in a minor’s name. Basic information is gathered for the minor’s KYC, while personal details, bank account information, and an annual income range are collected for the guardian’s KYC. 

Apart from these, the guardian’s signature and photographs of the minor and the guardian are needed for the KYC. 

The minor demat account will be opened as soon as the broker gets all the necessary paperwork and signs it off.  

Also read: What is personal finance, and why is it important?

Benefits of opening a minor demat account 

  • Better financial management 

Unlike other investing vehicles, mutual funds and stocks usually give more significant returns. By creating a minor demat account, parents and guardians may better manage their children’s funds. You may, therefore, use this account to save aside funds for things like weddings, your children’s education costs, etc.

  • Encourages financial knowledge

A minor demat account serves as an introduction to the world of financial independence for kids. As kids become more and more fascinated with the intricacies of the stock market, they acquire vital life skills required to succeed in the real world.

Conclusion

The benefits of a demat account for minors are many. It may assist them in holding shares if the minor’s family has the interest & financial capacity. There is no denying that a demat for minors may be pretty helpful in teaching them how the financial world works.

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StockGro Team

StockGro is India’s first and largest ‘Social Investment’ platform aimed at helping you master the art of “Trading & Investment”. Trade, Invest and get rewarded to Learn everything about ‘Investments’ the fun-filled way.

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