4 Important Rules to Follow for Demat Account for Minor

Generally, we go through the educating process offered by schools and colleges in order to develop and hone our skills in attempts to create a career for ourselves that will help us generate a certain income. An income that we then try to invest in order to make increased returns and live a better life. However, in today’s day and age, where an individual graduates from a bachelor’s degree at the age of 21 or 22, and with a masters being a near necessity, it becomes a while till we can invest. As a result of this, it was decided that the facility of a demat account for minors will be offered.  However, there are some demat account rules applicable as well. Let’s take a look. 

• Important rules to follow for demat account for minors.

1. A demat account for minors. 
A minor demat and trading account for minors can now be opened. However, it is not the case that a minor can open a demat account. Instead, the parents of the minor (father, and in their absence, mother) can open and operate the demat for minors until their child reaches the age of adulthood. This offers a number of benefits, allowing parents to give their children a head start with investments through a demat account for minors.

2. The trading account.  
While a minor can open a demat account, it is not as simple for them to trade in equity through a stockbroking app. In fact, they are not allowed to do so at all as per certain demat account rules. This is due to the restrictions put on the acquisition of a minor demat and trading account. A minor cannot use a trading account to buy or sell stocks, partake in intraday trading or any equity purchases. The minor demat and trading account can only be used to sell equity that has been received as a gift, as a transfer from family members, or by implementation of the government. 

3. Joint ownership. 
As part of the demat account rules for minors, a minor cannot be a joint owner in any demat accounts. If their name is part of a demat account for minors, it has to be sole ownership, though operated by their guardians. 

4. KYC. 
Despite Being a minor, anyone looking to open a minor demat and trading account has to follow all KYC procedures. Therefore, both the guardian of the child and the child themselves have to fulfil their formalities. 

Conclusion. 

A demat account for minors offers a number of advantages. If the minor has ownership of any shares etc by means of family, it can help them acquire the same. However, there are a number of demat account rules that need to be followed in order to ensure the account is not misused for the sake of the account holder and any other parties involved. Nevertheless, a demat for minors can come in extremely handy. For instance, you could purchase an IPO allotment in the name of your child through the demat for minors, allowing them to realise significant returns when they reach an age of maturity.

Related Articles:  Why is a Demat Account a must for 21st Century Investor | Evolution of Demat and Trading Account in India | Factors to Consider When Opening a Demat Account 

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