Demat Account For Minors: A Step-Wise Guide


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Demat Account For Minors

A Demat account or a Dematerialised account is an account that holds share certificates and other securities in an electronic format. It makes share trading and investing easy. In India, a minor is permitted to capitalize on investing in the share market. A minor is a person who has not achieved the age of 18. But to be able to do so, they need to have a Demat account in their name. But there is a catch though, the conventions of opening the record and working it will be led by a guardian in the interest of the minor. The guardian will either be the natural guardian, for example, a mother or father, or a court-selected guardian.

Procedure to start a Minor Demat Account:

The system of opening a minor Demat account is similar to that of opening a standard Demat Account. The rudimentary set of papers required are:

  • Identity Proof
  • Address Proof
  • Age Proof
  • Photograph

After filling the regular form for opening the account, the KYC rites to verify the account holders’ identities and address need to to be done for both guardian and the minor in question. All the documents need to be signed by the guardian. And the age of the minor is supposed to be provided mandatorily and should be supported by documented evidence.

All these documents are then submitted to the Depository Participant. The yielded documentation is then authenticated. Once the authentication procedure is completed without any complications, the Demat account is opened. The fee that you will be charged for opening the account depends on the brokerage firm you choose.

Limitations of Opening a Demat Account for a Minor:

There are a few restrictions that come along with opening a Demat Account that belongs to a minor.

  • Restriction from some investments: Trading in sectors such as equity intraday, currency derivatives (F&O) and equity derivatives (F&O) is not allowed for a person operating from a minor account.
  • No Joint Account Holders: A Demat account in the name of a minor cannot have a joint holder.
  • Only Delivery Shares Permitted: Sale or purchase of only Delivery Shares is allowed if the Demat Account of a minor is used.
  • It cannot be linked to a Trading Account: It is not allowed for a minor’s Demat account to be linked with a trading account.

Procedure for when a minor Demat account holder becomes an adult:

On becoming an adult, the minor has to yield to a new KYC and account opening form. The account holder will be given a few documents with the terms and conditions and the following need to be acknowledged. The guardian’s details will be erased from the account and get replaced with the signature and details of the said account holder. On the off chance that the word minor shows up in the name under which the first account was opened, at that point the current account must be shut and another account opened. When the procedure is finished, the depository participant will move the holdings in the first Demat record to the new record.

The procedure to follow in case of the Death of the Guardian of the Minor:

The following documents need to be submitted in case of the Death of the Guardian:

  • A copy of Notarized original Death Certificate of the deceased guardian.
  • If the death certificate is downloaded from an online portal, then it needs to be verified and authorized by the Depository Participant.
  • After the process is completed, the minor’s account will be frozen until the documentation of the new guardian will be submitted, verified, and approved.

Opening a Demat Account for a minor is the ideal platform for the financial planning of a child from an early age. It is the right thing to do for those who are looking to financially safeguard the future of their child. The minor receive essential education in equity investment which can be useful later on. They likewise comprehend the significance of saving money, investing in the right instruments, and financial planning, therefore making sure their future is secure.

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Nirmalya Ghosh
Nirmalya has done his post graduate in business administration and now working as digital marketing executive in a US based firm. He loves to share the trending news and incidents with his readers. Follow him in Facebook or Twitter.