Last Updated: Mar 21, 2024 Value Broking 6 Mins 2.9K

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The world of the stock market is full of possibilities. If you’re wondering about the minor trading account, then yes, it is possible to open a trading account for minors in India, so you don’t have to ponder questions like “Can a minor open a trading account?” because that is very much possible. The stock market world is expanding, and the number of investors and traders is rising every day. Due to the tough competition, everyone questions their job and its security. Having a financial backup plan in advance is never a bad thing. Hence, possibilities like trading accounts for minors came into existence. Investors can start trading early with a minor trading account and secure a healthy future.

But, before you get into the specifics of a minor trading account opening online or offline, you should first understand who is considered a minor in India. A minor in India is anyone under the age of 18. However, minors cannot directly indulge in the stock market; their trading accounts will be controlled by their parents or official guardians, who will open and handle the trading accounts on their behalf.

A single guardian or a parent can become the guardian of the trading accounts for multiple minors and handle their trading accounts. For example, if a father has two children under the age of 18, he can be the guardian of both of their trading accounts for minors. 

What is a Trading Account?

A trading account is used in the stock market to acquire and sell equity shares. Previously, the stock exchange operated on an open outcry basis. The traders utilized hand signals and vocal communication to communicate their buying/selling decisions in this game. Trading accounts replaced the open outcry system soon after the stock exchanges adopted the computerized system. Buyers and sellers do not need to be physically present at the stock market to make orders when using the online method. They instead create a trading account with a registered stock market broker, who trades on their behalf. Each trading account has its own trade ID, which is used to complete online transactions.

How does a Trading account work?

A trading account serves as a conduit between an investor’s Demat account and bank account. When an investor wants to buy stock, he places an order through his trading account. The aforementioned transaction is currently being conducted at the stock exchange. When he executes, the requisite number of shares are credited to his Demat account, and a comparable value is taken from his bank account.

Minor Account Opening Process and Document Requirement

Document submission is the most crucial part of the stock market, and you will have to submit all the documents to the DP. The answer to the question “Can a minor create a trading account in India?” is essential. as well as making certain that all documents are in the minor’s name:

  • A photocopy of a minor’s Aadhaar card
  • The photocopy of the minor’s PAN card
  • The canceled cheque of the bank account for information like the IFSC code, the name of the account holder, and the account number.
  • The birth certificate photocopy of the minor
  • All the above-mentioned documents will have to be certified by the guardian, and your guardian will have to sign all the documents on behalf of the minor.

The guardian will also have to submit the documents in order to open the trading account for the minor. 

  • The Aadhaar card
  • The PAN card
  • The registration number and the email ID of the guardian

The above are only a few documents. The requirements of the documents can increase and decrease as per your DPs’ requirements. The following is the process of a minor trading account opening online. 

What is Permitted?

  • Can apply for IPO, FFO, OFS, and other securities in the name of a minor using a minor account.
  • Through a stockbroker, you may invest in ETFs, shares, and securities through a stockbroker.
  • Mutual funds are an option for investment.

What is Not Permitted?

  • Any type of speculative action, such as intraday purchase and sell.
  • Non-delivery transactions.
  • Futures and options trading
  • Payment from a bank account other than the Minors.
  • Pledge of stock

Process of Account Opening

Since everything has become digital, you can also open a minor training account through digital methods:

  • Register on the trading platform of your DP, using the name of the minor and the guardian’s email address.
  • Complete all the information about the minor in the form. Make sure not to confuse the guardian and the minor.
  • Submit the required documents for the minor as well as the guardian.
  • Keep in mind that the above-mentioned process is just a standard process, and it may differ from one DP to another. Hence, it is only wise to contact your chosen DP about all the required procedures for minor trading accounts opening online or offline.

Minor to Major

The path of the stock market has evolved, and people are now more accepting of this new way of saving and investing their money. Hence, the requirement for trading and Demat accounts is increasing, and even the banks are entering the field of the stock market by providing facilities like three-in-one trading accounts. You can understand the depth of the stock market by just observing the increasing need for trading accounts for minors in India.

What will happen if you open a minor trading account and that minor ages and becomes a major? The answer is easy. In that scenario, the major will now have two basic options, and both of these options are only possible if the selected DP of the major allows it. First, the major can shut the minor account, open a new trading account, and transfer all the transactions into the new trading account; the second option is to turn the minor account into the major account.

An investor wishing to convert their minor account into a major account will have to fill out the online application form and the modification form by visiting the official website of their selected DP. Then, the investor will have to send the Aadhaar details and the modification form to the headquarters of their DP.

The above procedure can change as per the DP of the investor. Hence, always make sure to consult your request through your DP in the case of such procedures.

Conclusion

Your child’s trading account may be used to save and track cash for their future schooling and other costs. They will also be more conscious of the need to save and invest the money as they get older. This financial literacy may be a significant competitive advantage for your child as they grow up. In India, over 76 percent of those polled for research had a weak understanding of the fundamentals of money. In contrast, a youngster who grows up with an online trading account has excellent financial literacy from an early age.

Frequently Asked Questions (FAQs)

No, it is not required for minors to have a separate savings account. You can link the minors’ trading accounts to their guardians’ bank accounts and proceed with your trading strategy. Keep in mind that the bank will open a separate account for the minor. However, opening a separate account is entirely up to the guardian.

Yes, there are some restrictions on the trading account for minors. Those restrictions include not allowing them to trade in segments like equity derivative trading [F & O], equity intraday, and currency intraday [F & O].

Yes, the PAN card of the guardian as well as the minor is required to open a trading account for a minor. There are many other documents as well. You will have to submit all the documents required by your DP, and then your DP will open the trading account for a minor.

Yes, you can open a minor Demat account and handle that account on their behalf.

Yes, as long as they meet all other standards, such as holding the stocks on the record date, just like any other major.

There are two options:

  • Sell them using the minor trading account connected to the minor Demat account where you obtained the allocation. The procedure is the same as with any other trading account.
  • Sell the shares after transferring them to the Guardian’s trading account.

 

It is important to note that it makes no difference where you sell it because the tax responsibility is with the Guardian account.