In India, exposing kids to financial markets at a young age can help them develop a solid financial foundation. A growing number of parents who want to invest on their children’s behalf are opening a demat account for minors. However, before going for minor demat account opening online, there are a few important factors to take into account.
- Age and Documentation Requirements
When creating a small demat account, documents must be carefully considered. A guardian, typically a parent, must open the account in the minor’s name and keep it open until the child turns 18. Essential papers include the minor’s birth certificate, and PAN card, along with addressing verification. Along with their PAN card, proof of address, and proof of identification, the guardian must also present their KYC documentation. Before beginning the online application process, all papers should be easily accessible and properly scanned.
- Guardian’s Role and Responsibilities
As a guardian, you will be solely responsible for and will hold the minor’s demat account for trading. Realizing that you will be solely involved in all transactions and the management of the financial affairs of a minor until they attain the legal age is important under this account. In activating the minor’s account, the guardian, whose details the minor’s account will be opened, must have a dematerialised account with the same dealer. Remember that when it comes to taxing the gains or losses on an investment, the minor’s name does come up.
- Converting to Regular Account After Majority
When a minor attains a legal age of 18, he or she has to transfer their demat account to a normal trading account, which involves fresh KYC norms, besides obtaining a consent from the holder of the account. Some preparation for this change should involve keeping proper records, and there should be information about the change process. In certain situations, brokers may require that the account be closed and a new one opened.
- Investment Restrictions and Limitations
Guardians should be aware of the limitations associated with minor demat accounts. Futures and options trading as well as intraday trading are prohibited with these accounts. Mutual fund investments and delivery-based equities trading are the only allowed activities. The kinds of securities that can be exchanged and the transaction quantities may also be restricted. It is easier to design investing plans effectively when one is aware of these limitations in advance.
- Bank Account Linkage Requirements
In fact, a minor who wishes to open a demat account must also own a savings bank account of their own. Any transaction in trading and investing will be done from this account. Verify that the bank account is active and correctly connected to the demat account. In order to facilitate the management of investments along with returns, the majority of banks provide small savings accounts that are operated by the guardian.
Conclusion
One important step in protecting your child’s financial future is opening a minor demat account online. A mobile trading platform has made the process more efficient, but it still demands close attention to detail and adherence to several legal standards. Before creating an account, take the time to fully comprehend every detail.