Financial Awareness Level
What is a Minor Demat Account?
A Minor Demat Account is a Dematerialized (Demat) account opened for a child below 18 years of age. This allows minors to hold and invest in securities, such as stocks, mutual funds, and bonds, under the guidance of a guardian. A minor cannot operate the account independently, and all transactions must be executed by a parent or legal guardian.
Can a Minor Open a Demat Account?
Yes, a minor can open a Demat account, but it must be operated by a guardian. The account automatically transitions into a regular Demat account when the minor turns 18 years old.
Rules for a Minor Demat Account
- The account is in the minor’s name, but a guardian (parent/legal guardian) operates it.
- Trading in equity derivatives (F&O) is not allowed.
- A trading account for minors can be opened only for delivery-based equity investments (no intraday or margin trading).
- Upon turning 18, the account must be converted into an individual Demat account with fresh KYC verification.
How to Open a Minor Demat Account Online?
1. Choose a Depository Participant (DP)
- Select a SEBI-registered stockbroker or DP
2. Submit Required Documents
- The following KYC documents are required:
| Document | Required for |
|---|---|
| Birth Certificate | Proof of minor’s age |
| Aadhaar Card of Minor & Guardian | Identity & address proof |
| PAN Card of Guardian & Minor | Mandatory for investments |
| Guardian’s Bank Details | Linked for fund transfers |
| Photographs of Minor & Guardian | For identity verification |
3. Complete In-Person Verification (IPV)
- Some brokers may require IPV (In-Person Verification), either physically or via video KYC.
4. Receive Account Details & Start Investing
- Once verified, the Demat account is activated, and the guardian can begin investing on behalf of the minor.
Benefits of a Minor Demat Account
- Early Start to Investing – Helps children build wealth over time.
- Long-Term Capital Growth – Ideal for stocks, ETFs, and mutual funds.
- Tax Benefits – Income from investments may be clubbed with the guardian’s income, offering tax-saving opportunities.
Limitations of a Minor Demat Account
- No Intraday or Derivative Trading – Only equity delivery trades are allowed.
- Guardian-Controlled Transactions – Minor cannot trade independently.
- Conversion Process at 18 – Additional KYC documents are required for transition.
How to Convert a Minor Demat Account to an Individual Demat Account?
When the minor turns 18, they must:
- Submit a new account opening form to their DP.
- Provide fresh KYC documents (Aadhaar, PAN, bank proof).
- Complete an in-person verification (IPV).
- The account will be converted into a regular Demat & trading account.
Conclusion
A Minor Demat Account is a great way to introduce children to investing early. While it has some restrictions, it offers a solid foundation for long-term financial growth. Parents and guardians can use it to invest on behalf of their children and secure their financial future.
By setting up a Demat account for minors, parents can give their children a head start in investing while ensuring their portfolio is managed responsibly.
For further details check here:
e-Guide for Demat Account Holders
What is a Mutual Fund? - Beginner's Guide to Investing
AMFI - Introduction to Mutual Funds
Disclaimer:
The information is for general purposes only and not an investment advice. Readers should seek professional advice before taking any investment related decisions.
FAQ Section
Can a minor open a Demat account online?
Yes, most brokers offer online minor Demat account opening.
Can a minor trade in the stock market?
Yes, but only in delivery-based equity trading (no intraday or derivatives).
Who can be the guardian for a minor Demat account?
A parent or court-appointed legal guardian.
Can I link my minor’s Demat account with my trading account?
No, the minor Demat account must have a separate trading account.
What happens when the minor turns 18?
The account is converted into a regular Demat account with updated KYC.
Is PAN mandatory for a minor Demat account?
Yes, both minor and guardian need a PAN card.
Can a minor invest in mutual funds?
Yes, mutual funds can be bought through a minor Demat account.
Can a minor Demat account have a nominee?
Yes, but only the guardian can assign the nominee.
Can two guardians manage a minor’s Demat account?
No, only one guardian is allowed.
Can a minor withdraw money from the Demat account?
No, only the guardian can withdraw or transfer funds.
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Disclaimer
An Investor Education And Awareness Initiative Visit https://www.hdfcfund.com/information/key-know-how to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints directly with the AMCs. if they are not satisfied with the resolutions given by AMCs, they may raise complaint through the SCORES portal on https://scores.gov.in. SCORES portal facilitates investors to lodge complaint online with SEBI and subsequently view its status. In case the investor is not satisfied with the resolution of the complaints raised directly with the AMCs or through the SCORES portal, they may file any complaint on the Smart ODR on https://smartodr.in/login.
