A minor demat account is a type of demat account that can be opened for individuals under the age of 18. These accounts are managed by a parent or legal guardian until the minor reaches adulthood. This facility allows minors to hold securities in electronic form, providing a smooth transition into the world of investments. While the account operates similarly to a regular one, certain restrictions are designed to protect the minor from undue risk.
This article will discuss the documents required to open a Minor Demat Account and provide the necessary insights for parents/guardians.
To open a minor Demat account, the minor and their parent or legal guardian must submit specific documents to complete the process.
Below is a detailed list of the necessary documents:
By ensuring all these documents are in place, the Demat account opening process becomes smooth and efficient.
Below are the steps you could follow to open a minor Demat account:
Let's take a look at the limitations of a minor Demat account:
A minor Demat account requires the active participation of a parent or legal guardian. The minor cannot independently manage the account as the guardian is responsible for all transactions and account administration.
In a minor Demat account, trading is restricted to equity delivery only. While buying and selling stocks is allowed, more complex financial instruments like derivatives (futures and options) are not permitted.
Unlike regular Demat accounts, a minor's Demat account cannot be connected to online trading platforms. This prevents the account from being used to execute trades through online portals, with all trading activities requiring guardian intervention.
A minor Demat account cannot be opened as a joint account. The account is registered solely in the minor’s name, with the guardian acting as the custodian.
A minor Demat account allows investment primarily in equities but does not support other financial instruments such as commodities or currencies. The account’s focus is limited to stock trading for the minor’s safety.
When a minor turns 18, their Demat account becomes inactive, and they must initiate the process of to open demat account which is regular. To do this, the account holder needs to fill out a new Demat account application form and submit the required KYC documents. Unlike the minor Demat account, this process does not require the signature or involvement of the parent or guardian. Any securities held in the minor’s account are transferred to the new account. Once the account is active, the individual gains full control and can trade or invest across all segments, subject to the stockbroker's approval.
Opening a minor Demat account is a great way to introduce young individuals to the world of investing, allowing them to grow financially aware from a young age. While the guardian manages the account until the minor reaches adulthood, it serves as a learning ground for prudent financial habits.
Understanding the documents required and the limitations of a minor Demat account ensures a smooth opening process. As the minor matures, they can take full control of the account, offering them a seamless transition into the financial world.
Yes, minors are eligible to open a Demat account. The only thing is the account is to be handled or operated by a parent or a guardian till the minor attains 18 years of age. But the thing is, only the minor's father or mother can be appointed as a guardian. In any other case, the said guardian must have been appointed by a court order.
In addition to that, the minor needs to be the sole holder of the account, implying that no joint holders or nominees can be appointed.