Accounting

Demat Account for Minor

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Demat account is the primary requirement for trading and investing in the Indian stock market. The introduction of demat account has resolved many problems that traders and investors use to face earlier when the shares were held in the physical form. With this account, the whole process of completing a transaction has become smoother and quicker.

In order to transact in the Indian stock market, it is mandatory to open a demat account with the broker by completing the necessary formalities. The demat account is often used by individuals to invest their savings. Many people open a demat account for their children so that they can invest for their future.

In this article, we will learn about the details of demat account for minor.

Let us first learn about the condition that must be fulfilled for demat account opening for minor.

Condition for Opening Minor’s Demat

A demat account for minor is legal and can be opened in his/her name. However, the only condition for opening a demat account in the name of the minor is that it must be opened only by the natural guardian (parents) or court-appointed guardians. The guardians must fill the standard demat account opening form. Along with that, two KYC forms must be filled i.e. one for the minor and another for the guardian. The KYC form has to be signed by the guardian.

Let us now learn about the documents and details to be submitted for minor’s demat account

Documents and Details Required for Minor’s Demat Account

The guardian needs to submit the necessary documents like identity proof, address proof, passport size photograph, PAN card copy, etc. to the depository participant. The depository participant will verify the submitted documents and capture the minor’s PAN details in the DPM system after the verification. On successful processing of the documents, demat account for minor will be created.

There are some restrictions on a minor’s demat account in comparison to a regular demat account. In this section of the article, we shall learn about those restrictions.

Restrictions for a Minor’s Demat Account

  • The minor’s demat account cannot be used by the guardian to trade in certain segments like currency derivatives (F&O), equity derivative trading (F&O) and equity intraday.
  • A minor cannot be a joint holder to any joint demat account.
  • The minor’s account can be used only for purchasing or selling delivery shares.
  • The demat account of a minor cannot be linked to a trading account.

After learning about the restrictions on minor’s demat account, let us now learn about the procedure to be followed when the minor turns major.

Procedure To Be Followed When Minor Becomes Major

If the word “minor” is present during the time of account opening then the current account needs to be closed and a new demat account should be opened.

However, if the word “minor” was not present in the “Account Holders Name” then the following procedure must be followed;

  • New KYC application or details of KRA registration of the account holder must be submitted.
  • A new account opening form shall be submitted by the account holder.
  • The depository participant shall give an agreement copy consisting of the rights and duties of both parties to the account holder.
  • The details of the guardians shall be deleted and the account holder’s signature shall replace the guardian’s signature.

The above mentioned is the procedure to be followed when the minor turns 18 years of age i.e. turns into a major.

If you too are looking to invest in shares by opening a minor’s demat account, you may consider Kotak Securities. Their friendly and customer support staff shall assist you in completing all the formalities of the account. Moreover, by opening a demat account with them, you ensure yourself against any fraud in your demat account. Kotak Securities is known for its ethical working standards and it is the most reputed broking firm in India.

About the author / 

Robert B. Wilfong

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