Can a minor buy stocks in India? Yes, but not on their own. They need a Minor Demat Account, managed by a parent or legal guardian. It’s a great way to begin their financial journey early, but the process needs to be handled correctly, right from PAN card requirements to guardian consent and KYC. With increasing awareness about long-term investing, many parents are now thinking of opening a minor demat account for their children. But how exactly does this work? What are the rules? And is there any minimum age for demat account in India?
If you’ve been considering this option for your child, here’s a simple step-by-step walkthrough to get started on Shoonya!
- What Is a Minor Demat Account?
- How to Open a Demat Account for a Minor on Shoonya
- Documents Required for Minor Demat Account
- What are the Benefits of opening a Minor Demat account?
- What Happens to the Demat Account When a Minor Turns Major?
- SEBI Rules for Minor Demat and Trading Accounts
- Minor Demat Account | FAQs
What Is a Minor Demat Account?
A minor demat account is a dematerialised account opened in the name of a child below the age of 18. Just like a regular demat account, it holds shares and securities in electronic format. However, since minors are not legally allowed to manage investments on their own, the account is operated by a parent or guardian until the child turns 18.
Minimum Age for Demat Account in India
There is no minimum age for opening a demat account. Even a 1-year-old can have one. This often leads to confusion between the demat account age limit and the minimum age for trading in India. Since a minor is not legally allowed to sign contracts or trade independently, the account is operated by a guardian until the child becomes a legal adult (i.e., turns 18).
Let’s clarify:
- Minimum age for demat account: No age limit. It can be opened at any age.
- Minimum age for trading in India: 18 years. However, minors cannot independently place buy/sell orders or trade in derivatives.
How to Open a Demat Account for a Minor on Shoonya
At Shoonya, minor demat accounts are opened offline. If you’re planning to invest on behalf of your child, here’s exactly how you can start:
Step 1: Reach out to us
You can connect with us in any of the following ways:
- Live Chat
- Email: [email protected]
- Call: +91 82888 26999
Once we receive your request, we’ll email you the account opening form.
Step 2: Fill out the form
- Print the form, fill it, and sign it.
- Send the completed form along with the required documents to the below mentioned address:
Finvasia Center, Plot no. D-179, Industrial Area, Sector 74, Sahibzada Ajit Singh Nagar, Punjab 160055
Documents Required for Minor Demat Account
To open a demat account for a minor, the following documents are needed:
- Minor’s Birth Certificate
- Minor’s PAN card
- Minor’s Address proof
- Minor’s Bank proof (cancelled cheque, bank passbook, or bank statement)
- Guardian’s PAN card
- Guardian’s Address proof
- One passport-size photo each of the minor and the guardian
You can open only a demat account for the minor. Buying or selling of securities is not allowed. Only transfer of holdings is permitted.
What are the Benefits of opening a Minor Demat account?
Some of the benefits of opening a minor Demat account are:
• It allows parents or guardians to plan and save for their children’s future financial goals, such as education, wedding, relocation, etc.
• A minor demat account introduces children to the world of financial literacy and independence. Hence, teaches them the concepts of saving, investing, and compounding.
• A demat account for a minor enables the transfer of securities to the minor’s account as a gift, inheritance, or corporate action without any tax implications.
What Happens to the Demat Account When a Minor Turns Major?
When a minor turns 18 years old and becomes a major, he or she has two options:
• Close the minor Demat account and open a new one in their name, transferring all securities from the minor account without incurring any charges.
• Convert the minor Demat account into a major Demat account by signing a new agreement with the DP or broker and completing the KYC formalities.
This process involves the following-
- Deleting the guardian details
- Granting the minor full control over the account.
SEBI Rules for Minor Demat and Trading Accounts
If you’re opening a demat account for minors, it’s important to understand the official rules and limitations set by SEBI.
1. Can a demat account be opened for a minor?
Yes. A minor demat account can be opened in the name of the child. However, the account will be operated by a natural guardian until the minor turns 18. The guardian must be the father or, in his absence, the mother. If neither is available, a court-appointed guardian is required.
2. Can a minor be a joint holder in another demat account?
No. A minor cannot be a joint holder in any demat account, even with a parent.
3. Can a trading account be opened in the name of a minor?
Yes, a trading account can be opened in the name of a minor. However, there are a restrictions. A minor trading account can only be used to sell securities that the minor already owns. These could come through:
investment in IPO, inheritance, corporate action, off market transfers under the following reason:
i. Gift / Donation
ii. Transfer between family members
iii. Implementation of Government / Regulatory Directions or Orders
The guardian has to manage the account until the minor becomes a major.
4. Can a minor trade in the stock market?
No. Minors cannot enter into direct trading contracts or actively buy/sell stocks. While a demat account for minors can hold securities, a minor trading account is allowed only for selling pre-owned securities under specific conditions.
These are-
investment in IPO, inheritance, corporate action, off market transfers under the following reason:
i. Gift / Donation
ii. Transfer between family members
iii. Implementation of Government / Regulatory Directions or Orders
5. Are KYC norms applicable for minor accounts?
Yes. Both the minor and the guardian must comply with KYC regulations. This includes submission of valid PAN, Aadhaar, proof of relationship, and photographs.
6. What happens when a minor turns 18?
Once the child becomes a major, the account doesn’t close.
But the new adult must do the following things-
- Confirm the holdings in the existing demat/trading account
- Submit fresh KYC documents
- Sign a new agreement with the broker
This is known as the conversion of a minor demat account to a major one, and it is required to continue operating the account independently.
Minor Demat Account | FAQs
A minor demat account is opened in the name of a child below 18 years. It is operated by a parent or legal guardian until the child turns 18.
There’s no minimum age limit. Even a 1-year-old can have a demat account, but it must be managed by a guardian.
Yes, minors can have a demat account, but they cannot trade. The guardian operates it until the child turns 18.
SEBI allows only one guardian to manage the account. Minors can’t trade but can hold securities through IPOs or gifts.
You must be 18 or older to trade on your own. Minors can’t place trades but can sell pre-owned stocks via a guardian.
There’s no lower age limit. You can open a minor demat account if you are under 18 years old and your account is operated by your guardian or a parent. Trading independently is allowed only after turning 18.
Source: SEBI
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.