Introducing Minor Demat Account: Build Financial Literacy From An Early Age
The Indian economy is rapidly developing. The stock markets with the same flow are doing so in the same way. It has attracted many investors who have started their investment journey.
Interestingly, even minors are looking to explore new avenues of investment. They are also looking to capitalize on the diverse opportunities for growth in the financial market.
But the question is, “How can minors engage in this financial segment?.” The Demat Account for minors is the answer. This article will help you understand the meaning of a minor Demat account and follow its features, opening process, benefits, and restrictions.
What Is A Demat Account For Minors?
An individual under the age of 18 can use the Demat Account for minors. It is effective in holding stocks and securities. Alongside, it easily deals with bonds, mutual funds, and other investment areas.
However, since minors cannot independently seep into the legal contracts, they need the assistance of a parent or guardian who can take charge of all the decisions regarding this account until the minors attain the age of eighteen.
The responsibility of operating the Minor Demat Account- mainly opening, closing, and overseeing accounts lies with the legal parent or guardian of the Minor.
Finally, minors can make their guardian the authorized individual who can transfer shares as gifts. Hence, having a Demat account helps minors foster financial literacy and money management skills. It allows them to learn about investment markets from an early age.
Features Of A Minor Demat Account
There are some of the core features of the Demat accounts for minors. Let us check them here in this section.
Firstly, the Demat Account for minors retains an independent portfolio for the minor’s investments, even if it is linked with the parent or guardian’s primary Demat account.
Secondly, the parents can gift shares/securities to their children and deposit them into the minor Demat account.
Thirdly, the depository participants provide different educational resources and tools. The minors can access them. It assists in developing a core understanding of investment principles.
Lastly, there may be circumstances, like the death of the parent or guardian. However, in such a case, the Demat account enables the beneficiary get the benefits.
How To Open A Minor Demat Account Online
Opening a demat account for minors goes through some of the steps. We are going to discuss them all in this section.
Step 1. Select a reliable Depository Participant authorized by NSDL or CDSL to open a minor Demat account.
Step 2. Fill in basic details, like name, email address, and telephone number.
Step 3. Submit the following documents –
- PAN of both parent/guardian and minor as proof of identity
- Aadhar Card of both parent/guardian and minor as proof of address
- Birth certificate of the minor
- Bank account details of the parent/guardian
Step 4. Fill in the Know Your Customer (KYC) details (for both – minors and parents and guardians).
Step 5. The Depository Participant will verify all your documents. Once verified, the minor Demat account will be activated.
Note – Once the minor reaches legal age, the account will be deactivated. They have to submit a new account opening application form with the required documents to reactivate it.
Benefits Of A Demat Account For Minors
Other than the features, there are also some of the benefits associated with the demat account for minors. You must keep abreast of these benefits.
1. Early Financial Education –
Having a minor Demat account provides minors with numerous opportunities to gain a deeper understanding of financial markets and cultivate investment practices.
2. Long-Term Planning –
You must try to look at the different stock markets at an early age. There is a lot of potential benefit from substantial long-term gains. You need to learn to make the best use of the power of compounding effect and accumulate wealth over time.
3. Tax Benefits –
Minor Demat accounts can help minors take advantage of specific tax benefits. According to tax regulations, they qualify for exemptions on capital gains tax up to a certain limit.
4. Skill Development –
Access to a Demat account enables minors to develop essential skills such as research, analysis, risk management, decision-making, etc.
Hence, you can understand that the Dmat accounts for minors have their own advantages. This is why the popularity of it is quite high.
Restrictions On A Minor Trading Account
Nothing in this world is all bright. It’s the same for minors in the Demat account. There are some major restrictions, too, with these accounts for Minors. Let’s check this out.
- Minors have limited control over their Demat account. Their parent or guardian has the authority to make the decisions on investment.
- Some trading restrictions safeguard the interests of minors. One can not trade them in segments like equity options, equity intraday, equity futures, or derivative instruments.
- Minor Demat accounts cannot be opened as Joint accounts.
What Is The Process Of Opening A Demat Account For Minors
While there is no minimum age requirement for opening a Demat account, opening one requires following a series of well-organized steps. To open a demat account for minors online, you may need to visit a stockbroker’s website. The professional must be affiliated with CDSS or NSDL.
Other than this, you are required to produce some documents like Proof of Identity (PAN card) for both the guardian and the minor. Besides, you also need to submit proof of address, account details, and, finally, the bank account details. All these steps can help you open your demat account.
Summing Up
Minor Demat Accounts are an essential tool to facilitate young individuals’ understanding and knowledge about the stock markets. Therefore, one must bank on a dependable stock broker in India, like Choice. This helps the Depository participant open this Demat account.
Choice is a full-service stock broker, which has quite a significant reputation in India. The provider has over thirty years of experience in the finance industry.
Their team consists of dedicated experts. They are good at providing the most valuable financial services. It helps individuals attain their financial goals with utmost efficiency.
Open a minor Demat account with Choice today and start your child’s investment journey!
Disclaimer: While this article aims to provide accurate and up-to-date information, it should not be considered official financial advice. It is advisable to always consult a financial advisor before making investment decisions.
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