Demat Account For Minors In India: Can You Invest For Your Child?

Yes, You Can. Here Is How It Actually Works

A demat account can be opened in a minor's own name, at any age, including for an infant, with a parent acting as natural guardian or, where no parent is available, a court appointed legal guardian. Either parent, mother or father, can act as guardian, but only one guardian is permitted per account, not both parents jointly.

The minor is the legal beneficial owner of everything held in the account. The guardian is the one who actually operates it, since a minor cannot legally sign a financial contract or instruct a transaction on their own.

What The Account Can And Cannot Do

Generally Allowed	Generally Not Allowed
Holding stocks, mutual funds, ETFs, bonds, government securities, and Sovereign Gold Bonds	Intraday trading
Receiving shares through IPO allotments, gifts, or corporate actions such as bonus issues	Futures, options, or any derivatives trading
Guardian operated delivery based buying and selling, at most brokers	The minor operating the account independently in any way before turning 18

Whatever the specific broker's rule on active buying turns out to be, every source agrees on the two things that matter most: no intraday or derivatives activity of any kind, and the minor has no operational control whatsoever until they turn 18, regardless of how mature or financially literate they might already be.

The Tax Point Most Parents Miss

Opening the account in your child's name does not move the tax liability to your child. Under the clubbing provision historically known as Section 64(1A), income from a minor's investments, capital gains, dividends, and interest alike, is added to the income of whichever parent has the higher income, and taxed at that parent's own slab rate, not assessed separately in the child's hands.

This applies regardless of who originally gifted the money invested, a parent, a grandparent, or anyone else, as long as the recipient is a minor and the income is not earned through the child's own skill or labour, such as a child actor's earnings, or through a specified disability exception.

A modest relief exists: an exemption of up to Rs 1,500 per child per year, for a maximum of two children, historically available under Section 10(32), reducing the amount actually clubbed into the parent's income.

Component	Amount
Total income from the minor's investments in a year	Rs 12,000
Exemption under Section 10(32)	Rs 1,500
Amount actually clubbed into the higher earning parent's income	Rs 10,500

Illustrative figures only. These provisions continue in substance under the Income Tax Act, 2025, effective from April 2026, and this article uses their long familiar section references pending final confirmation of how each has been renumbered. The account sits in your child's name. The tax bill, for as long as they remain a minor, sits in yours.

Documents You Will Actually Need

For The Minor	For The Guardian
Birth certificate or other proof of date of birth	PAN card
PAN card, in the minor's own name	Identity proof, such as Aadhaar, passport, or voter ID
	Address proof
	Bank account details, since the minor typically does not hold an independent bank account of their own

What Happens When Your Child Turns 18

The guardian's authority ends automatically on the day the child turns 18, not on some later date once paperwork catches up. The account must then be converted into a regular, individual demat account in the now adult's own name, requiring fresh KYC using their own PAN and Aadhaar, an In Person Verification step at many brokers, and updated bank account linkage, since the account can no longer rely on the guardian's bank details.

Clubbing of income also stops from that same date, which means the financial year in which your child turns 18 has to be split, income earned while still a minor clubbed with your own, and income earned afterward assessed in the child's own hands.

The practical lesson several experienced parents pass on is to begin the conversion process before the birthday, not after. Since the guardian's authority ends automatically and the now adult has to complete fresh KYC before regaining full control, an account left unaddressed around this transition can sit unusable for longer than families expect, simply because nobody started the paperwork early enough.

Note: The industry genuinely disagree on one operational detail: whether a guardian can actively buy shares for a minor's account through ordinary delivery based purchases, or whether the account is limited to receiving shares only through IPO allotments, gifts, and corporate actions. Most brokers describe active guardian operated delivery buying as normal practice, though at least one source describes a stricter reading. Confirm the specific rule with your chosen Depository Participant before assuming either. This article also focuses on a parent acting as natural guardian, the common case, rather than a court appointed legal guardian, which involves additional documentation not covered here.

This article is for general informational purposes only and does not constitute investment, tax, or legal advice. Rules around minor demat accounts vary by Depository Participant, and tax provisions described here reflect the position understood as of July 2026 under the Income Tax Act, 2025, and may be clarified or changed further. Confirm current account opening rules with your chosen broker or Depository Participant, and consult a qualified tax professional for guidance specific to your family's situation.

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