Many parents want to secure their children’s future by investing money in the equity market. However, for this, a demat account is required.
While parents can open a Demat account, can they open the same account in their children’s name in India? If so, what is the procedure?
Let us understand this topic in detail in this article. step-by-step on how to open a minor demat account.
We haven't started offering minor Demat account openings yet, but we will inform our users as soon as we do.
What is а Demat Account?
When you buy shares of а company, they get credited to your demat account digitally.
Demat accounts are offered by banks, brokers, and online trading platforms like Dhan. All your shares stay safe in this account in electronic form.
You can keep shares for years or sell them at any time to get funds.
In India, for children below 18 years, parents have to open an account on their behalf. Parents monitor the account till the child turns 18.
The minor cannot directly make share market investments. However, as per the Companies Act, 2013, any citizen of any age can own shares of listed companies.
This can be in the form of gifting which is the easiest way to transfer shares to a minor’s demat account.
This is how often parents transfer shares to minors. Note that all transactions, as well as the opening of the Demat account itself, must be carried out by the guardian.
Let us take a look into the account opening aspect for minors now and how to do it.
How to Open a Minor Demat Account?
There is а small catch here. Minors, typically under the age of 18, are not legally able to enter into contracts, including buying shares directly from the stock market.
However, a minor can still open a Demat account in their name in India, and a guardian can operate it until the minor becomes an adult.
The minor’s father or mother must be the guardian. If neither parent is available, the court can appoint a guardian.
Here are the steps to open а Demat account for а child on Dhan:
- Choose a Platform to Open Demat Account
While there are many demat account providers, Dhan offers a user-friendly platform suitable for beginners in trading. The process of opening an account is paperless and seamless.
You can invest in various financial instruments such as shares, mutual funds and many others with Dhan.
They also have low fees charged on brokerage, which could save you some money. Additionally, Dhan provides quality client service, and it is always available when you need assistance.
- PAN Details of the Guardian
When you’re opening a Demat account for a minor, you need the PAN card details of the guardian. The guardian is usually a parent or a legal custodian.
The PAN card is a unique identification number issued by the Indian government for tax purposes.
People use it to track financial transactions. For the Demat account, the guardian’s PAN card details are needed to ensure all transactions are legal and traceable.
- Proof of Birth for the Minor
The next step is to provide proof of birth for the minor. This is typically a birth certificate, which is an official document that records the birth details of an individual.
Since the Demat account is specifically for a minor, the financial institution needs to confirm that the account holder is indeed under 18 years old.
Therefore, a valid proof of birth, like a birth certificate, is required.
- Identity Proof and Address for the Minor
Next, Provide identity proof and address proof for the minor. These are documents that confirm the minor’s identity and residential address.
They could be a passport, Aadhaar card, or school ID for identity proof, and utility bills or bank statements for address proof.
This is a standard requirement for most financial transactions to prevent fraud and misuse.
- Bank Details of the Minor
Opening a Demat account for a minor requires his bank details. This includes the bank account number, bank name, and branch.
These details are necessary to link the Demat account with the minor’s bank account for seamless transactions. The bank account must be in the minor’s name.
- KYC Details of Both the Guardian and Minor
Once the minor becomes an adult, update the Demat account. Submit the minor’s PAN and KYC details to the Demat provider.
Additionally, the minor’s signature, verified by the bank, will replace the guardian’s signature on the account.
This process ensures the account is updated with the now adult account holder’s information.
Conclusion
In conclusion, opening a Demat account for a minor is a crucial step towards their financial education and future security.
By choosing a reliable provider, filling out the necessary forms, submitting KYC documents, and linking a bank account, parents can initiate the process efficiently.
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