To many investors, opening a Demat account for a minor might seem unreasonable, but it can be highly beneficial. If you are an investor, you understand the power of investing early and the exponential return you can have when being invested for a long time. Get your child a Demat account on which you can stock up on investments for your child’s future.
What is a Demat Account?
A Demat account allows holding shares and securities in electronic form. A Demat account allows the investors to buy and hold shares in it; not only this, a Demat account holds all investments made by an individual in shares, ETFs, government securities and mutual funds in one place.
The Indian Stock market went through a digitisation process through Demat and enforced better and enhanced governance by SEBI. Moreover, the Demat Account reduces the risk of storing, damage, theft, and malpractices by storing securities in electronic format. Earlier, the account opening process was manual, and it took ages to get the account activated, but now anyone can open a Demat Account within 5 minutes. Even the pandemic worked as a catalyst, and many people got involved in share trading.
What is a Minor Demat Account?
A minor Demat account is the same as any Demat account except that it opened under the name of a minor, which means someone less than 18 years old. The guardian can operate the account till the minor turns 18. After that, the minor Demat Account can be converted to a standard Demat account.
Eligibility Criteria for a Minor Demat account
Opening the Demat account for a minor is similar to the Demat account for an adult. There aren’t any age barriers as the document required to open a Demat Account are as such:
- The minor should be a resident of India.
- The minor should have Pan Card and Aadhar Card certificates.
- The minor should have a bank account.
Since all of these criteria can be fulfilled without any age barrier, anyone can open a Demat account as long as they can produce proof of identity and address.
Documents Required for Opening a Minor Demat Account:
- Minor Pan Card
- Minor Address Proof
- Minor Bank Proof
- Guardian Address Proof
- Guardian Pan Card
Then the broker can ask for a few more documents such as a Minor Birth Certificate, photographs, etc. All these documents are crucial to opening a minor Demat account and when the minor turns 18. They will get notification from the stockbroker and Depository for conversion of the minor Demat account to the standard Demat account.
The same document such as updated Pan card, address proof, bank statements and photographs will be asked to be procured again for the process. After registration, your minor Demat account will be converted into a standard account.
Process of Opening a Minor Demat Account
- Opening a minor Demat account remains the same except for the KYC process.
- Choosing the stockbroker to open a Demat account with.
- Make sure they have a minor Demat account feature.
- Registering for the Demat account and doing all the due diligence such as filling out forms, providing documents and getting them verified.
While opening a minor account, everything is done in the name of the minor, but the guardian also has to go through a KYC process to get the account registered. It is known as dual KYC, where all the information of both minors and guardians will be submitted with photographs and signatures.
Creating a Demat account for your child can be highly lucrative as you are ensuring the finances for the future, and it will also be beneficial to teach the kid about the wondrous world of the stock market at a young age. And can learn about how to save money, invest that money and create more money.