As famously said by Warren Buffett (the best known investor the world has ever seen), it’s always important to start early!! And we all know how the saying goes, “Early bird gets the best picks.” Also, in today’s time when technological advancement and extensive information are so easily available, it would be a complete waste if one doesn’t en-cash the benefits.  This urge and expectation has brought in a new trend among our young and eager minds. Kids are like clay and the early introduction of investment planning or theories can mold them and their behavior for future financial planning and gains. That rounds us to our new topic, “Demat or Trading accounts for Minor”.

Starting off with the basics, let’s know what is a Minor Demat or trading account?

What is a Minor Demat and Trading Account?

The account is single-point access to the markets, where you can trade securities and the traded instruments, are kept in an electronic form in the account, which acts as a bank with the choice to deposit or withdraw. As minors cannot open an account in their name until they turn 18, minor trading accounts are “Demat account which is opened on behalf of a minor individual by their legal guardian or parent”.

Minor Demat & Trading Account: Features

  • The operating right remains with the legal guardian till the minor becomes a major, and then the individual has an option to either convert the account into a regular account or close the same and initiate a fresh normal account.
  • Two KYC application forms need to be submitted, one for the the legal guardian who has to provide the relevant KYC documents such as identity proof, address proof, PAN card, etc. And, the other form for the minor that must be signed by the guardian.
  • A minor’s PAN card and birth of certificate are required to open this account.
  • Similar to a regular demat and trading account, these provide a platform for trading equipped with tools, analysis, real-time trackers to facilitate better decisions and monitor progress.
  • A separate bank account is not required in the name of the child. The guardian or parent can add their name to their bank account to initiate proceedings.
  • You can also open a 3-in-1 (bank+demat+trading) account in the name of minor.
  • Any income from this type of transaction from the account would be added to the guardians or parents’ taxes for income tax return filing. This is a tricky part!
  • A minor demat account can also be used to apply for IPOs or initial public offerings while in the case of mutual funds, the child must be represented by the legal guardian or parent. The mutual funds are then held in the child’s account as joint holding is not allowed in this portfolio. 

Minor Demat Account: Are there any restrictions?

A minor demat account can only be used to deal in delivery shares i.e. to invest in equity delivery trades only. It can’t be utilized to trade in following trading segments such as:

  • Equity Intraday
  • Equity derivative trading (F&O)
  • Currency derivatives (F&O).  Thus, their Demat account can’t be linked to a trading account.
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Minors are also not permitted to hold a joint demat account. A minor can have a separate demat account only.

Minor Demat Account: A Final Take

This investing tool is known to be helpful in planning finances for a child from a very young age and provides enough financial strength to propel their education and in turn their career.

Also, it serves as their first orientation to the world of saving, investing, planning and equipping them to have a healthy relationship with money. A solid investment foundation can build a beautiful and bright castle for your loved ones!

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Disclaimer: There is a high degree of risk involved in stock trading. The details given on this website are for informational purpose only and cannot be constituted as professional advice in any regard. Please follow due diligence while investing your money.

In conclusion, a Minor Demat Account is a powerful tool that is being utilized on a growing scale. It has become more accessible and easier due to smartphone applications and a load of information on the internet. Stock brokers are also taking out time to provide adequate information on their web pages or through responsive customer service. It’s high time to cash in! Both for the broker and the investor!

Have you started your investment planning? What’s your favourite way to invest money? Do share your opinions and feedback.