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Minor Demat & Trading Account Explained - IPO, Tax, NCD FAQ

Published on Wednesday, August 17, 2016 by Chittorgarh.com Team | Modified on Thursday, May 23, 2019

Minor Demat & Trading Account Explained - IPO, Tax, NCD FAQ

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A minor (below the age of 18) can invest in stock market. The guardian operates minor trading account, demat account and bank account. Most brokers in India allow Minor to open account. Read FAQ's about Minor Trading Account, Minor Demat Account, Minor Bank Account, Minor IPO Investment, Minor Tax Related Questions and Minor NCD investment.

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Frequently Asked Questions

  1. 1. Who is considered a minor in India?

    Children below the age of 18 years in India are considered as a Minor.

     

  2. 2. Can a Demat and Trading account be opened for a minor?

    Yes, both demat and the trading account can be opened in the name of a minor child. The account is operated by a Guardian till the minor becomes major, Guardian has to be the father or in his absence mother. In absence of both, father or mother, the Guardian can be appointed by the court.

    The Guardian is legally entitled to open, operate and even close the bank account, demat account and trading account on the minor's name.

    Note that two KYC Application Forms must be filled i.e. one for the Guardian and another for the minor (to be signed by Guardian).

    Things to know about Minor Demat & Trading Account:

    • Demat account can be opened in the name of a minor child by the natural guardian (parents) or court-appointed guardians only.
    • The guardian needs to fulfill all requirements for documents and KYC norms to open the account in the name of the minor.
    • PAN Card of the legal Guardian is required to open the demat or trading account.
    • The date of birth certificate is required for a minor child.
    • When minor turns major, the account becomes inoperative. A new separate account has to be opened in this case. Demat holdings can be transferred from minor account to major account.
    • If paper shares are held jointly with a minor, they need to first be transferred to the minor and then to the demat account in the minor's name.
    • A 3-in-1 Account (Bank + Trading + Demat Account) can be opened in the name of a minor.
    • A minor cannot be a joint holder in a demat account. The demat account can be held only in the name of the minor.
    • If shares are held jointly with a minor in paper form, they need to first be transferred to the minor and then to the demat account in the minor's name.
    • Through the Minor's Trading account only delivery of shares can be bought & sold.

     

  3. 3. Which broker in India allows opening of demat and trading account in the name of the minor?

    ProStocks.com is among the most popular in minor account offerings. People also like them because they don't charge any account opening fee and Demat AMC is free for life after you pay a one-time refundable deposit of Rs 1000 to them.

     

  4. 4. Does minor need a bank account before opening a demat or trading account?

    No, a separate bank account in the minor's name is not required.

    Minor needs to be one of the Bank Account holder either as Sole Holder or jointly with Guardian and or other siblings. Simply add a minor to any of your (Guardian) bank accounts. This is sufficient to open a demat / trading account.

    Please do not fall into the trap of bank officers who will try hard to open a separate account in the kid's name.

    Anyway, for tax purposes, minor income is added to the parent's income, it doesn't make sense to have a separate bank account.

     

  5. 5. Can a minor demat account be opened without its PAN card?

    The minor PAN card is mandatory for a minor demat account and trading account. Guardian (father or mother) also have to provide their PAN card along with the minor.

     

  6. 6. What are minor stock trading account restrictions?

    1. Minor Trading Accounts are allowed only to invest in the stock market (Equity Delivery Trades only).
    2. They are not allowed to trade in the following segments:
      • Equity Intraday
      • Equity Derivative Trading (F&O)
      • Currency Derivatives (F&O)

     

  7. 7. Can a minor be a joint holder in a demat account?

    No. Minor can't be a joint holder in a demat account. A joint account cannot be opened with a minor in it as one of the account holders.

    Minor account should be a separate account.

     

  8. 8. What happens to a minor demat account when the minor becomes major?

    When a minor completes 18 years of age and become major, he has two options:

    1. Close Minor Demat Account and open a new Demat Account

      The existing minor account can be closed and a new demat account opened in the name of the minor turned major. All securities in the minor account can be transferred to the new demat account.

    2. Convert Minor Demat Account to Major Demat Account

      Existing minor account can still be used. Minor turned major has to sign a new agreement with the DP and complete all formalities required for opening a new demat account. Guardian details entered earlier have to be deleted.

     

  9. 9. What are the tax laws in the case of Minor? Suppose the minor account made a profit of 2L in a year and the patent come under 20% tax slab, does minor need to pay 20%?

    The minor income is added in father or mother whose income is more.

    Minor doesn't have to file separate tax returns.

    'Any income that accrues or is paid to a minor is added to the parent's income under section 64(1A) and the parent will be taxed just like if it were their own income.'

     

  10. 10. I have two minor children's. Can I be the Guardian of both of them when opening the minor demat account on my kid's name?

    Yes, you can.

     

  11. 11. Can I trade online in my son's minor trading account?

    Yes, the Guardian on the account is allowed to trading online on behalf of the minor.

    Note that only Equity Delivery traders are allowed to the minor. Other segments including intraday and F&O are now allowed in the minor trading account.

     

  12. 12. Can a minor apply in buyback offers?

    Yes, as long as they fulfill all other requirements like any other major i.e. hold the stocks on the record date.

     

  13. 13. How do I open a minor demat account?

    Demat account can be opened in the name of a minor. The account will be operated by a guardian till the minor becomes major.

    The guardian is legally entitled to open, operate and even close the bank account, demat account and trading account on the minor's name. For a minor demat account, two KYC Application Forms must be filled i.e. one for the guardian and another for the minor. Minor Trading Accounts are only allowed to invest in the stock market (Equity Delivery Trades only). They are not allowed to trade in Equity Intraday, Equity Derivative Trading (F&O), Currency Derivatives (F&O).

     

  14. 14. What you should consider before opening Minor Demat Account?

    Following things should be considered before opening Minor Demat Account:

    • PAN card of minor is mandatory
    • The legal guardian has to provide all the documents and fulfill the KYC norms.
    • PAN Card of a legal guardian is required to open a demat or trading account.
    • The date of birth certificate is required for a minor child.
    • When minor turns major, the account becomes inoperative. A new separate account has to be opened in this case. Demat holdings can be transferred from minor account to major account.
    • If paper shares are held jointly with a minor, they need to first be transferred to the minor and then to the demat account in the minor's name.
    • A 3-in-1 Account (Bank + Trading + Demat Account) can be opened in the name of a minor.

     

  15. 15. Can I open minor demat and trading account online?

    Only a few banks allow opening demat and trading accounts online. Demat as well as Online Trading accounts are available in SBI Cap Sec Ltd, ICICI Bank, HDFC Bank, etc.

     

  16. 16. Can minor apply for IPO (Initial Public Offer)?

    Yes, minor can apply for IPO shares as long as they have a demat account.

     

  17. 17. Does Minor need a Demat account to invest in IPO?

    Yes, demat account is mandatory to apply in an IPO. Minor can still use bank account of any family member to apply in an IPO.

     

  18. 18. Can I sell shares which I received in the minor demat account through IPO allotment?

    Yes, the equity delivery trades are allowed to the minor. You can see IPO shares anytime. Please contact your broker for the same.

    You could also transfer shares from minor demat account to Guardian demat account and then sell it. As anyway the tax liability is with the Guardian, it doesn't actually make any difference.

    Note that you cannot do equity intraday or F&O trading in the minor account.

     

  19. 19. How do I sell shares received in IPO allotment in minor demat account?

    There are two ways:

    1. Sell them directly through the minor trading account linked to the minor demat account in which you received the allotment. The process is same as any other trading account.
    2. Transfer the shares to the Guardian's trading account and sell them.

    Note that as tax liability lies with the account Guardian, it actually doesn't matter where you sell it from.

     

  20. 20. As PAN Card of the Guardian is mandatory in the minor account, will that cause any problem in IPO Allotment if IPO is applied by both Guardian and minor?

    The primary PAN number on minor's demat account is minor's own PAN number. Thus it doesn't cause any conflict when applying in IPO as only primary PAN Number is considered for checking the duplicate application.

    Many people apply in IPO with all their family members' name (including major and minors) to increase their chances of allotment in case IPO oversubscribed multi-fold.

     

  21. 21. How to apply in an IPO on a minor's name?

    There are three ways to apply in an IPO on a minor's name; using net-banking ASBA IPO application or using paper application form submitted to the branch. Minor above the age of 15 can also apply using UPI through their stock broker.

    1. Net-Banking ASBA IPO Application

      Few banks like HDFC allow Minor's to apply in IPO using their own net-banking account. This is the most convenient way to apply in an IPO on Minor's name. Note that the Bank Account and Demat Account used to apply in IPO application should have same primary account holder (same PAN number).

    2. Paper-based IPO Application

      If your bank doesn't offer online IPO application for Minor's, you could submit the paper-based IPO application to your bank branch.

    3. UPI as Payment Method (Minor above 15 Years age)

      Minor's above the age of 15 get access to net-banking and thus can create UPI ID. Once you have UPI ID setup, you could apply in an IPO from any stock broker who offers UPI-based IPO application. Using UPI, a minor can apply up to Rs 5 lakhs of shares in an IPO.

     

  22. 22. Do I need a minor bank account for minors trading and demat account?

    Yes. The minor bank account is mandatory to open a trading or demat account in Minor's name. All banks open Minor Bank Account with information from the legal guardian.

     

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18 Comments

18. Koushal   I Like It. | Report Abuse |   Link | Nov 27, 2021 4:57:12 PM Reply
How to sell minor account allotment on the same day of listing of any IPO.
And
Which broker allow to sell and how to sell Minor account allotment on listing day.
17. Suresh   I Like It. | Report Abuse |   Link | Nov 18, 2021 7:41:23 AM Reply
Any other broker ( Other than Prostocks) who opening trading and demat account for minors?
16. mentor ipo   I Like It. | Report Abuse |   Link | Mar 1, 2021 11:15:48 AM Reply
Respected Sirs,
No one is ready to Open Minor's Trading account.
Then how can we sell allotment received in IPO ?
Pl. suggest asap.
16.1. Vicky   I Like It. | Report Abuse |   Link | Jul 24, 2021 3:18:50 PM
U can't "sell" but u can "transfer" those shares to ur demate through cdsl myeasiest facility from login to cdsl
16.2. Newrookie   I Like It. | Report Abuse |   Link | Aug 4, 2021 1:06:29 PM
@Vicky How long would that process take?
15. ajaykumar   I Like It. 1 | Report Abuse |   Link | Mar 18, 2017 9:56:43 AM Reply
Which broker in India allows opening of demat and trading account in the name of minor
15.1. Administrator   I Like It. | Report Abuse |   Link | Aug 7, 2018 9:30:23 AM
As per our information ProStocks.com offers Minor Demat and Trading Account. Here is the official post on their website
https://www.prostocks.com/faq/12-account-opening/21-can-minor-open-the-account-with-prostocks.html
14. Madhu Maladhari   I Like It. | Report Abuse |   Link | Nov 30, 2020 4:40:07 PM Reply
If i need to open my sibilings multiple account for minor is their any way without opening demat account i can buy share?
13. Hari Om   I Like It. | Report Abuse |   Link | Aug 29, 2020 2:50:14 PM Reply
Not, Only Demat account can be opened, Trading account can't be opened. You can refer to this link https://support.zerodha.com/category/account-opening/offline-account-opening/articles/can-i-open-an-account-in-my-child-s-name...
12. Vijay B Doshi   I Like It. | Report Abuse |   Link | Mar 1, 2020 7:38:30 PM Reply
Minor demat account માં nominee રાખી શકાય?
11. Vijay B Doshi   I Like It. | Report Abuse |   Link | Mar 1, 2020 7:36:22 PM Reply
Minor demat account માં nominee રાખી શકાય?
10. Sonali   I Like It. | Report Abuse |   Link | Dec 26, 2019 9:36:29 AM Reply
Can i sell stock by minor demat account?
9. Mehta   I Like It. | Report Abuse |   Link | May 12, 2017 9:35:54 AM Reply
Yes. No one is ready to open trading account for Minor. How we will sell the shares we get throught IPO in minor demat account...This information is false...there is no reliable source to this....
9.1. Rajesh   I Like It. | Report Abuse |   Link | Jul 20, 2017 9:18:55 PM
Check with SBI, I am in the process of opening.documents required are
1) Aadhar card of minor
2) Pan card of minor
3) joint account in SBI with guardian

9.2. Administrator   I Like It. | Report Abuse |   Link | Aug 7, 2018 9:25:24 AM
Please contact ProStocks.com

You could open Minor account without any problem. Its a simple process. You could find more detail about this at:
https://www.prostocks.com/faq/12-account-opening/21-can-minor-open-the-account-with-prostocks.html
8. Johny   I Like It. | Report Abuse |   Link | Aug 7, 2018 2:57:40 PM Reply
@Admin - can a Minor who is US citizen but residing with Parents in India and holding a OCI card open a Demat, Trading and Bank Account?
8.2. Johny   I Like It. | Report Abuse |   Link | Aug 7, 2018 7:09:53 PM
@Admin

Thank you very much for the response. Can you suggest which broker can help me with this. I already have bank account and pan card. Prostocks said they don't open in this scenario.
8.3. Administrator   I Like It. | Report Abuse |   Link | Aug 8, 2018 10:37:51 AM
We know Prostocks.com is offering this service to many customers. Pls check with them for your situation.
7. Rajat   I Like It. | Report Abuse |   Link | Aug 7, 2018 5:01:36 PM Reply
If the parent has only 1 bank account which is already linked to his demat account, then is it possible that parent (guardian) can link that bank account to Minor's demat account as well?
7.1. Administrator   I Like It. | Report Abuse |   Link | Aug 8, 2018 10:37:16 AM
Yes, as long as you add the minor to the bank account. Adding minors to your existing bank account is easy. Visit your bank branch for this.
6. Imran   I Like It. | Report Abuse |   Link | Nov 21, 2017 10:51:59 PM Reply
What is the tax law in the case? Suppose the minor account made a profit of 2L In a year and the patent comes under 20% tax slab..then minor need to pay 20%?
6.1. Administrator   I Like It. | Report Abuse |   Link | Aug 7, 2018 9:33:37 AM
As per tax law's "The minor income added in father or mother whose income is more."

Reference:
https://cleartax.in/Salary/do-minors-have-to-pay-taxes
5. Karan Patel   I Like It. | Report Abuse |   Link | Jul 26, 2017 2:12:38 PM Reply
Can a minor demat account be opened without its PAN card?
5.1. Administrator   I Like It. | Report Abuse |   Link | Aug 7, 2018 9:22:46 AM
PAN Card is "mandatory" for minor before opening trading, demat or bank account account.
4. MB   I Like It. 1 | Report Abuse |   Link | Oct 30, 2017 12:09:56 PM Reply
For opening minor demat account, they ask pan card of legal guardian. Now if Guardian has its own demat account which he is using for applying IPO, the second IPO application through minor demat account shall be considered as separate IPO application or one IPO application only?
4.1. Administrator   I Like It. | Report Abuse |   Link | Aug 7, 2018 9:21:44 AM
Hi MB,

For minor account you will have to provide 2 PAN cards. First for minor and second for guardian (father or mother).

The primary PAN Card remains as minors PAN Card.

So, technically there is no issue in applying in IPO's. Actually this is the best way to improve your allotment chances in case of highly oversubscribed IPO's.

Many people we know does this. Don't worry, your IPO application will not be rejected.

Team Chittorgarh.com


3. Manish Garg   I Like It. 1 | Report Abuse |   Link | May 10, 2017 12:56:02 PM Reply
I talk to many brokers. No one is willing to open a trading account for a minor. Even I spoke to Sharekhan and they told me that demat account can be opened but not a trading account. That means we can buy but not sell the shares in a demat account of a minor.
3.2. piyush   I Like It. 1 | Report Abuse |   Link | May 31, 2018 3:49:44 PM
you can transfer shares from minor demat account to guardian demat account and than sell it to market
3.3. Administrator   I Like It. | Report Abuse |   Link | Aug 7, 2018 9:11:12 AM
Hi Mr Manish,
Please contact ProStocks.com. They are fast growing discount broker. They offer Minor Trading and Demat account. Their demat AMC is free too with one time refundable deposit of Rs 1000.

You can get more detail at:
https://www.prostocks.com/faq/12-account-opening/21-can-minor-open-the-account-with-prostocks.html
2. Naeem   I Like It. 1 | Report Abuse |   Link | Dec 8, 2016 9:32:27 AM Reply
Can you please help me with the exchange Circular for Trading account for minor?
1. Mansukhbhai O Oatel   I Like It. 1 | Report Abuse |   Link | Aug 25, 2016 2:02:58 AM Reply
Very very informative useful to open minor dmat cum trading ACC.