If your financial portfolio involves owning and trading company shares, then you will need to have a demat, or dematerialised, account. These accounts allow you to hold all your shares and stocks in a dematerialised form, i.e., not in paper form. While most demat accounts in the country are held by adults, it is possible to open such an account for a minor as well.
Who Is a Minor?
In India, any individual under the age of 18 is considered to be a minor.
Opening Demat Accounts for Minors
For demat accounts specifically, only the parents, who are the natural guardians of the child, and court-appointed guardians are allowed to open an account in the name of the minor. Until the minor turns 18, the guardian is legally allowed to open the account, operate it, and even close it if he or she so wishes.
How to Open Demat Account?
The process of opening a demat account is the same for both minors and adults. A standard account opening form will need to be filled out by the parent or guardian. The guardian is then required to fulfil all the Know Your Customer (KYC) norms to be able to open the account. While opening an account for a minor, two sets of KYC documents will need to be submitted. The first set will be for the minor, while the second set will be for the guardian. The Permanent Account Number (PAN) of the minor and the guardian will also have to be submitted before the account can be opened.
What Documents are Required?
To be able to open a dematerialised account for a minor, these are the documents you will be required to furbish:
- PAN card of the minor
- KYC documents for the minor
- KYC documents of the guardian
- PAN card of the guardian
- Date of birth certificate for the minor
Can a Minor be a Join Account Holder?
When it comes to demat accounts, it is not possible to have a minor as a joint holder on the account. All minor accounts are required to be separate, stand-alone accounts.
Who Will Operate the Account?
Only the parent or court-appointed guardian is legally allowed to operate the minor’s account. It’s important to note that trading accounts cannot be linked to a minor’s dematerialised account.
Does the Minor Need to File Taxes?
Irrespective of the kind of profit the minor earns via the account, the minor will not be required to file his or her taxes. Instead, the profit will be added to the parent or guardian’s income, and will be filed with their returns.
Can the Minor Continue to Use the Account as an Adult?
One of the documents that need to be submitted to open a minor’s demat account, includes proof of the minor’s date of birth. Once the minor becomes an adult, the account will automatically become inoperative. If the individual would like to continue trading once they turn 18, they will need to open a new account, and they can transfer their holdings from the minor account to this new account. In some cases, it’s also possible for the individual to convert their minor account to a regular account.
Demat accounts are beneficial as they facilitate easy transactions and allow us to store all our investment certificates and physical securities in a safe and secure account. With this handy guide, you can easily set up a dematerialised account for your little ones, and help create a corpus for them to enjoy once they grow up.