What Is a Demat Account?
Dematerialisation (Demat) is a process to convert securities from physical form to electronic form. It offers depository services through SEBI-registered depository participants and is a secure and convenient way to hold your securities. A demat account also helps to avoid problems generally associated with physical share certificates. Access to such as account requires an internet password (IPIN) and a transaction password (TPIN). Visit Kotak Securities for more details.
How to open demat account for minors
Opening a demat account for minors can quickly be done by filling up KYC forms and submitting the relevant documents of the guardian. There are two KYC forms that must be filled – one for the minor and the other for the guardian. It should be noted that before you approach the depository participant, a Permanent Account Number (PAN) must be obtained for the minor.
The documents that are required from the guardian are proof of identity, proof of address, PAN card, and a passport-sized photograph. The birth certificate of the minor would also be required. After verifying all the details provided for the minor, if the Depository Participant (DP) is satisfied with the documents submitted, the account will be opened in the name of the minor. A minor’s account can be opened with any of the registered depository participants near your place of residence.
The account opening and maintenance charges for such accounts vary with brokerage firms. However, the initial paperwork for opening the account more or less remains the same. Some banks offer the said account clubbed with a user’s bank account and trading account. Meanwhile, stock brokerage companies provide benefits and expertise with attractive benefits for new users.
There are two options available when a minor attains majority:
- The existing account can be closed and a new one can be opened. In such a scenario, all securities present in the minor account are transferred to the new account.
- The existing account can continue. When the minor turns major, a new agreement with the Depository Participant (DP) is initiated and all the steps are followed to open a demat account. The guardian’s details, which were previously entered, need to be deleted.
Once an account is opened, any addition, modification, or deletion of the account holder’s name is not permitted.
Restrictions on Account Trading for Minors
Minor Trading Accounts can only invest in the stock market, which means Equity Delivery Trades only. They are disallowed from trading in the Equity Derivative Trading (F&O), Equity Intraday, and Currency Derivatives (F&O) segments.
Importance of demat accounts
As per Securities and Exchange Board of India (SEBI), you need a demat account to buy or sell shares. In India, you can trade shares on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Use your account to store shares as per your investment plans, in the form of ETFs.
ETFs or Exchange-Traded Funds are financial instruments to hold assets such as shares, bonds, commodities and more in electronic format. Anytime, anywhere trading becomes possible for investors with ETFs.
As such, it is good to have all the required information on hand before you start trading.