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Everything you need to know about opening a demat account for minors: benefits, restrictions, and more

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Demat accounts for minors: From benefits to restrictions, all you need to know

Can a minor open a demat account? According to the Indian Contracts Act of 1872, minors are not allowed to enter into financial agreements. However, under the Companies Act of 2013, any Indian citizen, regardless of age, can own shares in publicly listed companies. This means that minors can legally open demat accounts in India. Although the account is technically owned by the minor, the parent or legal guardian must oversee the transfer of shares to the minor’s demat account as a gift until the child turns 18 years old.

To open a minor’s demat account, there are a series of structured steps to follow, although there is no minimum age requirement. You can initiate the process online by visiting the website of a stockbroker associated with either CDSL or NSDL. Basic information such as names, email IDs, and phone numbers will be required before progressing. KYC (Know Your Customer) details for both the minor and the parent or guardian must also be provided, along with documents like proof of identity (PAN card), proof of address (Aadhar card), the minor’s birth certificate, and bank account details of the parent or guardian.

Once all the necessary documents have been gathered and submitted to the stockbroker, they will proceed to open the demat account. It is important to note that a minor’s demat account cannot be opened as a joint account. When the child reaches the age of 18, the account transitions into an inactive state, and the account holder must complete a new account opening process to reactivate it without the need for the parent or guardian’s signature.

Opening a minor’s demat account not only offers an easy online process but also brings several benefits such as enhancing financial planning, fostering financial literacy among children, and introducing them to the realm of financial independence. However, certain restrictions apply to demat accounts registered in the name of minors, including limitations to equity trading only, the prohibition of trading accounts in the minor’s name, and the inability to have joint holders of the demat account.

In conclusion, opening a minor’s demat account can pave the way for their financial future and provide them with essential life skills. With the right guidance and understanding of the process, parents and guardians can help their children navigate the complexities of the financial world at an early age.

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