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Investing

Demat Account for a Minor: Opening Rules and Limits

A guardian can open a demat account in a child's name. It can hold shares and IPO allotments, but a minor cannot buy on the exchange or trade F&O.

AI

Written by Ananya Iyer

Published 5 November 2026·6 min read

On this page8 sections
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Yes, you can open a demat account in your child’s name. A parent or court-appointed guardian runs it until the child turns 18, and both must complete KYC. The account can hold and receive shares and IPO allotments, but SEBI does not let a minor buy shares through a broker, trade intraday or trade futures and options.

Key facts

Rule What SEBI and the depositories say
Who operates the account The father; if he is absent, the mother; if both are absent, a court-appointed guardian
KYC Both the guardian and the minor must meet KYC norms
Joint holding A minor cannot be a joint holder in any demat account
Buying shares on the exchange Not allowed: a minor cannot contract with a stock broker to buy
Selling Allowed for shares received through an IPO, inheritance, corporate action or certain off-market transfers
Mutual fund payments From the minor’s account, the parent’s or guardian’s account, or a joint account of the minor with the parent or guardian (since 15 June 2023)
Mutual fund redemptions Paid only into the minor’s verified bank account
Tax Income usually added to the parent’s income under Section 99(1)(c) of the Income-tax Act, 2025

Who can open it and which documents you need

SEBI’s FAQ on minor accounts says the guardian must be the father, or the mother if the father is not there. If neither parent is available, a guardian appointed by a court can open and run the account. The child is the sole holder. You cannot add yourself as a second holder, because SEBI does not allow a minor to be a joint holder.

Brokers ask for KYC papers for both of you. Zerodha’s minor account FAQ, for example, lists:

  • PAN of the minor and of the guardian
  • the minor’s Aadhaar for OTP verification
  • proof of the child’s date of birth, such as a birth certificate, school certificate, passport or mark sheet
  • a photograph, bank proof, and the guardian’s address proof and signature
  • a court order if the guardian is court-appointed

Lists vary slightly between brokers and depository participants, so check yours before you apply.

What a minor’s account can and cannot do

The demat account is a holding account. Shares can reach it through an IPO allotment, a bonus or other corporate action, an inheritance, or an off-market transfer such as a gift from a family member.

The trading side is narrow. SEBI says a minor cannot enter into a contract with a stock broker to buy or sell. A trading account in a minor’s name may be opened only to sell securities the child already holds from an IPO, inheritance, corporate action, or an off-market transfer marked as a gift or donation, a transfer between family members, or one made under a government or regulatory order.

Activity Minor’s account
Hold shares, ETFs and bonds in demat form Yes
Apply in IPOs Yes, through the guardian
Receive shares as a gift or inheritance Yes, by off-market transfer or transmission
Sell shares it already holds Yes, through the guardian
Buy shares on NSE or BSE No
Intraday, futures and options No

To build a share portfolio for a child, the usual route is to buy in your own account and gift the shares by off-market transfer. The depositories have a separate reason code for transfers between a minor’s account and the guardian’s account. Our guide to transferring shares between demat accounts covers the steps.

Mutual fund folios for minors

Many parents skip the demat account and invest through a mutual fund folio in the child’s name. The guardian must be KYC-compliant, and the child is the only holder.

SEBI changed the payment rule with effect from 15 June 2023. Payment by any mode is now accepted from:

  • the minor’s own bank account
  • the bank account of a parent or legal guardian
  • a joint account of the minor with the parent or legal guardian

Whoever paid, redemption money goes only to the minor’s verified bank account, which the child may hold with the parent or guardian. Before 15 June 2023, only the minor’s account or the joint account could be used to pay. If you plan a monthly SIP, our SIP calculator shows how the amount could add up by the time your child turns 18.

How the child’s investment income is taxed

Dividends, interest and capital gains earned in a minor’s name are generally added to a parent’s income. The rule is Section 99(1)(c) of the Income-tax Act, 2025, which replaced Section 64(1A) of the 1961 Act from tax year 2026-27.

  • The income is added to the parent whose total income is higher, while the marriage subsists. If the parents are separated or divorced, it goes to the parent who maintains the child.
  • Income from the child’s own work, skill or talent is not clubbed. Neither is income of a child with a disability of the kind listed in Section 154.
  • Schedule III (serial number 17) lets the parent exclude up to ₹1,500 a year for each child whose income is clubbed. Section 202(2) denies this exclusion under the new tax regime, so only old-regime filers get it.

Our page on taxation of shares and F&O explains how the gains themselves are taxed. For FY 2025-26 returns, the same rules apply under the 1961 Act. Speak to a tax adviser if large gifts or several children are involved.

What happens when your child turns 18

The account does not close automatically. SEBI’s FAQ says it can continue, but the new adult must confirm the balance and complete the formalities for opening an account in their own name.

  1. Ask the broker or depository participant for its minor-to-major change form.
  2. Complete fresh KYC in the child’s own name, with their PAN and signature.
  3. Give an updated bank account in the child’s name.
  4. Wait for the account status to change to major. The broker then opens full trading if the new adult asks for it.

Mutual fund folios follow a similar process. SEBI’s 2019 circular says no further transactions are allowed until the status changes to major, and SIPs, STPs and SWPs are suspended when the child turns 18. Submit the change request soon after the birthday so the SIP gap stays short. If you are comparing other accounts for children, our kids and minor accounts page covers bank savings options.

Frequently asked questions

Can a minor open a demat account in India?

Yes. A demat account can be opened in a minor’s name and is run by the father, the mother, or a court-appointed guardian until the child turns 18.

Can a minor buy shares or trade in the stock market?

No. SEBI says a minor cannot contract with a stock broker to buy or sell. A minor’s trading account can only sell shares the child already holds from an IPO, inheritance, corporate action or permitted off-market transfer.

Can a minor apply for an IPO?

Yes. SEBI’s FAQ refers to securities a minor holds from IPO investments, and brokers let the guardian apply from the minor’s account.

Can I be a joint holder in my child’s demat account?

No. A minor cannot be a joint holder in any demat account, so the child is always the sole holder and you act as guardian.

Can I pay for my child’s mutual fund from my own bank account?

Yes, since 15 June 2023. The payment can come from the minor’s, parent’s or guardian’s account, but redemptions go only to the minor’s verified bank account.

Is my child’s dividend income taxable in my hands?

Usually, yes. Section 99(1)(c) of the Income-tax Act, 2025 adds it to the income of the parent with the higher income, with a ₹1,500 exclusion per child under the old regime only.

What happens to the SIP when my child turns 18?

It is suspended until the folio is changed from minor to major with the child’s own KYC and bank details.

Sources

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