How To Open A Demat Account In A Minor's Name?

In previous blogs we had discussed about the importance of holding a demat account in order to own shares. One must have a Demat account to buy any company's shares. This can be opened with the depository participant and shares are kept in paperless format. It is also possible to open Demat account on behalf of a minor.

The process of opening a demat account for a minor is as follows.

Only the natural guardian (parents) or court-appointed guardians may open the Demat accounts in the name of a minor child.

Forms

The guardian must fill out the standard Demat account opening forms. It may be appropriate to fill out two KYC forms, one for the guardian and one for the minor (to be filled and signed by the guardian).

Documents and information

The guardian has to provide the documentation needed and comply with KYC requirements. The date of birth of a minor, with proof, must be obligatory. The guardian and the minor’s PAN will need to be provided.

Reason for opening account

Before the account is issued, the reason for opening the Demat account in the name of the minor must be mentioned. There is a need to state this justification in writing. An email from the guardian is also recognised by most institutions as written evidence.

The Account Process

Only the guardian will run the demat account of the minor, before the minor becomes major. No trading account can be linked to the Demat account of a minor.

On becoming a major 

When the minor turns 18, the Demat account will become inoperative. After which, you need to open a new Demat account. It is possible to move the former holdings into a new account. You may proceed with the same account, but a new agreement with the depository participant must be signed by the minor.

Key takeaways:

• Shares in the demat account of a minor are generally received by way of gifts.