How to Open Your FREE DEMAT Account
Investors from abroad and within India are increasingly directing their money towards the capital markets as a result of the country’s economy growing quickly. Adults are not the only ones taking part in it. Children are also getting accustomed to this trend in an attempt to capitalise on the market’s remarkable growth. Moreover, it is never too early to instill in your kids the value of investing as a life skill. Due to digitization, we now have a wide range of options to manage our funds and begin investing.
You might be wondering, how can a minor open a Demat account, and what is the minimum age required to do so. Well, this blog has answers to all your queries.
In India, investors must have a Demat account to electronically store the shares they purchase or sell. The National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the two main organisations that manage demat accounts. A Demat account can be opened by any Indian citizen who is older than eighteen (18) years of age. Minors are not legally permitted to enter into financial agreements or be parties thereto, as per the Indian Contracts Act of 1872. However, according to the Companies Act of 2013, it is legal for any Indian citizen, of any age, to own shares in publicly traded companies. As a result, opening a Demat account in India is legally permissible.
Although a minor theoretically owns a Demat account, they are not permitted to actively use it to purchase or sell shares. As a substitute, the primary person in charge of transferring shares to the minor’s Demat account must be a parent or legal guardian. Therefore, until the minor turns eighteen, the minor’s parent or legal guardian is responsible for opening, closing, and maintaining the minor’s Demat account.
What is the Process of Online Minor Demat Account Opening?
Pointers to remember before applying for a minor’s demat account.
Signature: The guardian’s signature alone may be used on the application. The minor’s guardian must sign the application on their behalf. This covers the endorsement across the minor’s photo as well as the self-attestation of all the paperwork.
Photographs: In order to comply with KYC requirements, pictures of the guardian and the minor is needed.
Dual KYC: The first page of the KRA form must have the minor’s information completed. The minor’s photo must be signed by the guardian on this page.
Whereas, the guardian’s information must be completed on the KRA form’s second page.
Applications to keep in hand.
- Minor birth certificate.
- Minor pan card
- Minor address proof
- Minor bank statement
- Guardian pan card
- Guardian address proof.
After getting all the required paperwork together, you can provide it to a stockbroker like Smifs for a hassle-free process. The stockbroker will open the minor Demat account if they determine that the documents are complete and in order.
What should you do when the minor reaches 18 years of age?
The minor must submit a request to the respective stock broking house (for instance, Smifs) to convert the demat account into a regular (major’s) demat account once they turn eighteen years old. The following papers must be submitted:
- Pan Card
- Address Proof
- Bank Statement
- Photographs
After verification, the guardian’s information will be removed from the account, and the minor’s (now major) signature will take its place.
What are the limitations of a minor demat account?
There are a few restrictions when opening a minor Demat account. First off, a minor is unable to independently manage a Demat account. To open a minor Demat account, the stockbroker will need the documentation of a parent or legal guardian. Secondly, a minor’s Demat account can only be used for trading in equities; minors are not permitted to trade currency or equity derivatives or engage in intraday equity trading. Thirdly, an online trading account cannot be connected to a minor’s Demat account.
What are the benefits of a minor’s demat account?
In addition to facilitating a seamless online account opening process, a small Demat account provides the following benefits:
Improved Financial Planning: Compared to other investment vehicles, equity equities and mutual funds frequently offer higher returns. Parents and guardians can better manage their children’s funds by opening a minor Demat account. You can therefore use this account to save for things like your wedding, your children’s further education, moving for work, etc.
Encourages Financial Literacy: A small Demat account exposes kids to the concept of financial autonomy. As students immerse themselves in the intricacies of the stock market, they acquire essential life skills that are essential for navigating the globe.
What methods should be followed in the event of the guardian’s death?
An application for a change of guardianship must be made to Angel One in the sad event that the guardian managing the minor’s demat account passes away.
The death certificate of the previous guardian must be included with this application in addition to the PAN card, Address Proof, Bank Statement, and Photographs
Now that you know the requirements for opening a minor Demat account and the minimum age to do so, it’s time to put your newfound information to use and help your kids have a bright future. To easily start a free online small Demat account, click this link.
