Importance of a Minor Demat Account
A minor demat account allows guardians to hold securities on behalf of individuals below 18 years of age. While minors cannot operate the account directly, it can be managed by a parent or legal guardian until the child reaches the age of majority.
1. Early Exposure to Financial Markets
Opening a demat account in a minor’s name introduces them to the basics of investing. It helps build awareness about stocks, bonds, and long-term savings from a young age.
2. Long-Term Wealth Planning
Investing early in a minor’s name can support future financial goals. The extended investment horizon enables funds to remain undisturbed, facilitating gradual capital growth over time.
3. Joint Financial Involvement
It offers a way for parents to include children in basic financial discussions. This involvement can gradually help them understand financial decision-making in a structured manner.
4. Regulatory Compliance and Control
Minor demat accounts come with controlled access. Since transactions must be managed by a guardian, it ensures that activities stay within defined regulatory limits.
Documents for Your Minor Demat Account
To smoothly complete the application, you must gather specific documents. You need paperwork for both the child (the minor) and the managing parent or legal guardian. The table below shows exactly who needs to submit each item. It also tells you if a digital upload is sufficient or if you need a physical copy. Use this simple guide for a quick and easy application process.
Document
| Who needs to submit
| Online Document (Digital Upload)
| Offline Document (Physical Copy)
|
Minor's Birth Certificate
| Minor (Guardian submits)
| Yes (Clear scan or photo)
| Yes (Self-attested copy)
|
Aadhaar Card
| Minor & Guardian
| Yes (Clear scan or photo)
| Yes (Self-attested copy)
|
PAN Card
| Guardian only
| Yes (Clear scan or photo)
| Yes (Self-attested copy)
|
Guardian's Income Proof
| Guardian
| Yes (Scan of salary slip, ITR, or bank statement)
| Yes (Copy of required proof)
|
Guardian's Bank Statement
| Guardian
| Yes (Digital e-statement or scan)
| Yes (Recent physical copy or scan)
|
Photographs
| Minor & Guardian
| Yes (Passport-size digital photo)
| Yes (Recent passport-size photo)
|
Process to Open a Minor Demat Account Online
Step 1. Choose a Depository Participant (DP)
Select a registered stockbroker or depository participant to open the Demat account for a minor. Ensure the DP supports minor accounts.
Step 2. Fill Out the Minor Demat Account Form
Visit the DP’s website or office and fill out the Demat account opening form. Choose “Minor” as the account type.
Step 3. Submit Required KYC Documents
Upload or provide the necessary KYC documents (see the document list below). The guardian’s documents must also be submitted for verification.
Step 4. Link to Guardian’s Trading Account
Since minors cannot trade independently, the guardian must have an active trading account linked to the minor's Demat account.
Step 5. Complete e-KYC Verification
Verify details using Aadhaar-based e-KYC or in-person verification, depending on the DP’s process.
Step 6. Signature and Declaration
The guardian must sign the declaration stating they are responsible for the minor’s investments. Minors do not need to sign until they turn 18.
Step 7. Account Activation
Once verification is complete, the minor’s Demat account is activated, and only delivery-based holdings can be invested.
Process to Create an Offline Minor Demat Account
If you prefer to open a minor demat account offline, the task is straightforward, but it requires physical documentation. Here are the simple steps and required actions to complete the formality successfully:
Visit the DP Office: Go to your depository participant's office to collect the physical account opening form. The guardian must fill out and sign this form completely on the minor’s behalf.
Gather KYC Documents: Collect all mandatory KYC documents for both the minor and the guardian. This includes ID proof, address proof, the guardian's PAN card, and the child's birth certificate (to confirm age).
Attach Proofs: Attach a recent passport-sized photograph for both the minor and the guardian. Also include a copy of the guardian's bank account document or a cancelled cheque.
Complete Verification: Finish the In-Person Verification (IPV) with a DP staff member. Once this check is completed, the documents will be submitted to activate the minor demat account.
Pros of Minor Demat Account
Encourages Early Investment: A minor demat account helps parents invest early for their child's future goals such as education, marriage, or relocation expenses.
Financial Literacy: Opening a minor demat account introduces children to the stock market, building awareness of savings and long-term wealth creation.
No Age Barrier: There is no minimum age requirement to open a minor demat account, allowing financial planning to start early.
Passive Growth Opportunity: Investments made in a minor demat account can compound over time, building wealth without active trading.
Guardian-Controlled Access: A parent or guardian supervises the minor demat account, ensuring responsible investment decisions.
Supports Mutual Fund Investing: A minor demat account enables investment in mutual funds, which often deliver better returns than savings instruments.
Digital Opening Process: Most brokers now allow online opening of a minor demat account, making the process simple and paperless.
Cons of Minor Demat Account
No Independent Opening: A child cannot open a minor demat account independently; it must be done by a guardian.
No Trading Facility: A minor demat account cannot be linked with an online trading account, which restricts buying and selling of shares.
Limited Transaction Control: The minor demat account is operated entirely by the guardian, with no real-time decision-making by the minor.
KYC Documentation: Opening a minor demat account requires submission of extra documents for both the child and the guardian.
Transition on Majority: When the minor turns 18, the minor demat account must be converted into a regular demat account, which involves additional formalities.
Restricted Trading Options: Derivatives and intraday trading are not allowed under a minor demat account, limiting investment flexibility.
Restrictions of a Minor's Demat Account
A demat account can be opened in the name of a minor by their parent or legal guardian. However, certain limitations are applicable to such accounts. These restrictions are meant to ensure regulatory compliance and safeguard the minor’s financial interests.
1. Trading Not Permitted
Minor demat accounts cannot be used for intraday trading or derivative trading. Only delivery-based buying and selling of securities is allowed.
2. Guardian’s Control
The account must be operated by the parent or legal guardian until the minor reaches the age of 18. All transactions require their consent and oversight.
3. KYC Restrictions
The guardian’s KYC details are mandatory at the time of account opening. Separate KYC in the minor’s name is not accepted until they reach legal age.
4. No Joint Holding
Minor demat accounts cannot be opened jointly. Only a single holder structure is allowed with guardian authority.
5. Account Conversion on Majority
Once the minor reaches 18, the account must be converted into a regular demat account after completing a fresh KYC in the individual’s name.
Key Points to Remember When Opening a Minor Demat Account
No Trading for Minors – A minor Demat account can only be used for holding shares; active trading, F&O, and intraday trading are not allowed.
Only Delivery-Based Investments – The account can only be used for investing in stocks, mutual funds, and bonds.
Guardian’s Responsibility – The legal guardian must operate and manage the account until the minor turns 18 years old.
Mandatory Conversion at 18 – Once the minor turns 18, they must complete KYC formalities to convert the account into a regular Demat account.
