A Minor demat account is a great way for parents or parents to start investing in the child's name and building money for the future. However, there are some important rules, tax ideas and investment options that you should know before you open one.

What is a Minor Demat Account?

A minor Demat account opens in the name of the person under the age of 18. Since minors cannot run financial accounts independently, the account should be administered by a guardian or parents of the child being 18 years old.

Rules for Opening a Minor Demat Account

1. Guardian role: The account is run by the natural guardian, "father or mother" or a parent appointed by the court.
2. Documents Required:
• Minor’s PAN card
• Minor’s birth certificate
• Guardian’s PAN card
• Guardian’s Aadhaar card or proof of address
• Passport-sized photos of both
3. One account per minor: Only a demat account can be opened for a minor account.
4. No Trading: Minors are not allowed to do intraday trading or derivatives (F&O). Only delivery-based investment is allowed.
5. Linking Bank Account: The bank account must be in the minor’s name or a joint account with the guardian.

Tax Implications

1. Clubbed Income: Any income (dividend or capital surplus) from a minor investment has been clubs with the income of the guardian for taxation.

2. Exemption limit: There is an income exemption of up to 1500 per child per year and 1500. Above this it has been done as part of the guardian's income.

3. After 18 years: When the minor turns 18, the account is transferred to their name. Since then, revenues are taxed according to the person's tax plate.

Investment Options in a Minor Demat Account

Although trade is limited, there are many safe and long-term investment options:

• Stock (only delivery -based)

• Mutual Funds

• Exchange-Traded Funds (ETF)

• Bonds and government papers

• Sovereign Gold Bond (SGB)

Conclusion

Opening a modest Demet account is a smart step for parents who want to secure the financial future of their child. Although there are some limitations, the benefits of initial investments remove them. Just make sure you follow the rules, understand the tax obligations and choose the right investment option to take the maximum benefit from the opportunity.

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