A minor is allowed to invest in the stock market in India. Hence a demat account can also be opened under the name of a minor. A demat account is an account which holds all your investments in the electronic format. In this account, your shares are held in the digital format. The demat account for trading can only be opened by the guardian of the minor. Here’s how you can open a demat account for minors.
Process to Open a Demat Account for a Minor
If you want to open a demat account for a minor, then you need to submit the required documents. The basic set of documents are identity proof, address proof, age proof, and a photograph. These need to be submitted to a Depository Participant.
The submitted documents are then verified by the DP. The PAN card number is then registered into the DPM system once verified. If the verification process is successful and there are no glitches, then the demat account is created.
The charges for opening the account and maintaining it varies with each brokerage firm. There are a few banks which offer the services to open a demat account along with the bank account and trading account.
Limitation for a Demat Account for Minor
There are a few limitations when it comes to opening a demat account for a minor.
1. Restriction for Some Segments
A person operating from a minor account cannot trade in segments such as equity intraday, currency derivatives (F&O) and equity derivatives (F&O).
2. No Joint Holding
A minor is not allowed to be a holder of a joint demat account.
3. Only Delivery Shares Allowed
Through a demat account of a minor one can only sell or purchase delivery shares.
4. No Link to Trading Account
A demat account of a minor cannot be linked to a trading account.
Process to Follow After Minor Turns Major
The process differs based on the fact whether the word ‘minor’ was present or not in the account holder’s name.
If it was then,
- The account holder needs to submit a new application form for KYC
- The account holder also needs to submit an application form for a new account
- The application form for the new account needs to be duly filled and complete
- Once the form is submitted and checked by the DP, the account holder will be provided a copy of the Rights and Obligations document. The acknowledgment of the same is kept with the depository as a record.
- The details of the guardian will be deleted and will be replaced by the details of the account holder.
If the word ‘Minor’ was present in the account holder’s name during the opening, then the account is closed and you have to open a new account.
Process to Follow in case of the Death of Guardian of the Minor
The following documents need to be submitted:
- Notarized original Death Certificate of the deceased guardian
- If the certificate is downloaded from the online portal, then it needs to be authorized from the DP
- Once this is done the minor’s account will be frozen till the documentation of the new the new guardian is done