Can A Minor Open A DEMAT Account: Today, anyone can truly achieve anything with consistency and perseverance. The obstacles imposed on entering a certain industry or field have become yesterday’s news.
While on the outside, that might look like the case, it’s genuinely not all that simple. And when it comes to the stock market and who can open a DEMAT account, that’s exactly the case.
Here, we’ll answer the question – “Can A Minor Open A Demat Account?” and show why the answer is not as simple as a “Yes” or “No”.
Can A Minor Open A DEMAT Account?
The answer to this question is complex because of various reasons. A minor, on their own, cannot open a DEMAT account. Only with the backing and assistance of a guardian, can they open a DEMAT account.
But, calling such an account a full-fledged DEMAT account wouldn’t be accurate. While a DEMAT account can be opened for a minor, it has limitations from a regular trading account, due to the obvious age restriction of the account holder and other reasons such as income and binding contracts that minors cannot sign.
Features Of A minor DEMAT Account
- As per SEBI, a trading account in the name of a minor can be opened only for the purpose of the sale of securities. The minor may have acquired said securities as a gift or donation, transferred from the parents/family members or the guardians, and/or inheritance.
Other than transfers and inheritance, they may also come into possession of the shares through corporate actions and government directions or orders.
- The account should be operated by the guardian until the minor turns into a major (The Age of 18 years old in India). This makes the accounting opening procedure twice as long because the KYC of the minor and the guardian have to be completed to create and operate the account.
- From a legal standpoint, a minor cannot enter into any contracts so they cannot sign a contract with stockbrokers that allow them to buy or sell securities. But, they can only sell securities that they possess in the manner mentioned in point #1.
- The minor can convert their DEMAT account into a regular trading account when they become a major. But that’s after going through several formalities and documentation steps to continue using the same account.
Important Points To Remember When Opening A Minor Demat & Trading Account
- A minor’s DEMAT account can be opened only by their parents or a court-appointed guardian.
- To open the account, they need to submit all the necessary documents and KYC rules of the stock broker to open the account in the minor’s name.
The list of documents needed is long as the KYC might be for one account, but here, there are two entities who hold the account – The minor and the guardian instead of the usual individual investor/trader.
- Here are some of the documents needed to open a minor account:
- KYC Form of the minor
- KYC Form of the guardian
- Copies of PAN of the minor and guardian, signed by the guardian.
- Address Proof – AADHAR or passport of the minor, signed by the guardian, and AADHAR, Driving license, passport, or voter ID signed by the guardian.
- Birth certificate copy, school leaving certificate or market sheet issued by the higher secondary school board. (Any one of the three)
- Canceled cheque or bank statement of bank account in the name of the minor.
- In-Person Verification
Important Points To Remember Regarding A Minor DEMAT & Trading Account
- No Joint Ownership
A minor cannot be a joint owner in any DEMAT account. While the account holder will be the sole owner, it has to be operated by the guardian only.
A minor, with the help of a guardian, can open a DEMAT account, but it doesn’t come with the same features as a regular account. A minor cannot use the account to buy and sell stocks like regular investors and traders.
This means even intraday trading and equity purchases are not allowed. They are limited to the shares gifted or transferred to them from the guardian’s account.
- The Purpose Of A Minor Demat Account
Assuming that the minor account was opened intentionally by the parents or guardian, it is created to give the minor a head start in investing, and accumulating wealth in their name until they reach legal age.
By eighteen years of age, a person will have huge upcoming expenses such as college tuition. Creating a portfolio well before they become adults helps the minor and also teaches the lesson of investing over time.
Also Read: 8 Best Books For Intraday Trading – Top Reads For Beginners!
Going through the steps to make a DEMAT account for a minor, you can see the process is much more complicated and straightforward.
One of the reasons could be the fact that minors are legally not allowed to enter into contracts, thereby making it a legal grey area when they enter the stock market.
Additionally, investing and trading are both risky, and naturally, minors may not possess the knowledge and authority required before making such decisions.
Most minors aren’t working so the funds they would use in the stock market will most likely be their parents and that carries a different sort of risk as well.
We hope this article answered your question – “Can a minor open a DEMAT account?” Thank you for reading and happy investing!
Tags: What is the minimum age to open a demat account?, Which demat is best for minor?, What documents are required for minor demat account?, Can minors Open Zerodha?, Who Can Open a Minor Demat Account in India?, Who Can Open a Minor Demat Account in India?, What are the benefits of a Minor Demat Account?, Trading account for minor India, Benefits of minor demat account, How to open demat account for minor