How To Apply For An IPO In A Minor's Name

A Structured Process To Apply For Ipo In A Minor's Name

There are several compliance steps to follow when applying for an IPO in a minor's name. Below is a step-by-step process:

Open a Minor Demat Account

• The first step is to open a Demat account in the name of the minor.
• Since the account is in the name of a minor, accounting and all other operations must be undertaken by their parent or other legal guardian.
• The required documents include the minor's PAN card, Aadhaar, and birth certificate, as well as the guardian's KYC documents.

Link a Bank Account

• The Demat account must be linked with a guardian's bank account.
• Ensure the names and order of account holders in the Demat and Bank accounts match the IPO application.

Ensure KYC Compliance

• Both the minor and the guardian must complete Know Your Customer (KYC) activities.
• This involves verifying the identity, address proof, and a photograph.

Methods To Apply For An IPO For Minors

Minors can invest in IPOs through three safe methods: ASBA, physical forms, and UPI, depending on their eligibility and access to these options.

• ASBA (Application Supported by Blocked Amount)

ASBA is a SEBI-approved mechanism that results in blocking the same amount from the guardian’s bank account. ASBA is easy and safe. ASBA can be done using net banking through a Self-Certified Syndicate Bank.

• Physical IPO Form

This is the traditional method of using paper forms and submitting them to a broker or bank for processing and review. Ensure the Demat account and minor details are entered correctly, as incorrect ones will result in rejection.

• UPI-based application

Minors aged 15 and above can apply for an IPO using UPI if the minor has a UPI ID linked to the guardian’s account. UPI is very fast and digital; however, UPI-based applications have a cap of ₹5 lakh per transaction under UPI rules.

Key Points To Be Aware Of

If applying for an IPO in a minor's name, remember the following.

• Same Name The minor must be the first holder and thus on the Demat account and the IPO application.

• Valid PAN The minor must have a valid PAN card, as it is mandatory for IPO applications.

• Correct Signature The guardian must sign all forms and declarations.

• No Joint Holders A minor's Demat account cannot have joint holders.

What Happens When The Minor Turns 18?

Once a minor reaches 18 years of age, their Demat account must be shifted to represent their legal rights and role as an adult investor. This is done by converting the existing minor account to a major account by providing new KYC documents such as PAN, Aadhaar, and others.

After the transition is complete, the minute takes over the role of the account holder with the rights and privileges of an adult investor. The minor can buy, sell, or hold securities, and the minor's guardian will not make decisions.

Advantages Of Early Investment For Minors

Investing your child's money in IPOs can be a smart way to build wealth. Reasons worth considering:

• Build Wealth
• Tax Benefits
• Discipline
• Low Risk of Misuse

FAQs

Can a minor apply for an IPO in India?

Yes, minors can apply for an IPO using a Demat account that was opened in their name and is managed by their parent or legal guardian.

Is the PAN mandatory for minors to make IPO investments?

Yes, the minor must have a valid PAN card issued in their name to apply for any IPO in India.

Can participants who are minors use UPI to apply for an IPO?

Yes, if the minor is age 15 or older and the UPI ID is linked to the account of an official guardian.

Can a minor sell IPO shares after they are allotted?

No, a minor cannot execute trades. Only the guardian can sell shares on behalf of the minor until the minor turns 18.

What happens to IPO shares after the minor turns 18?

Once the minor reaches adulthood, the Demat account must be converted to a regular account with updated KYC. The individual then gains full control over the holdings and future investments.