How to invest in MF online for minors?
Making investments for your child is an essential financial objective. These funds play a vital role in safeguarding your child's future as they mature
Mutual funds are a good investment option for those who want to build a substantial corpus for retirement or other financial goals. One advantage of mutual funds is that you can invest keeping your goals in mind, such as buying a house, funding your child’s education, or weddings.
Investing for your child stands as a pivotal financial objective, ensuring their future security as they advance in age. Therefore, initiating investments at the earliest opportunity is advantageous. You can gain insights into investing in mutual funds for your child through this video.
Now, the first question that arises is whether a minor, i.e., an individual under 18 years of age, can invest in mutual funds?
Yes, anyone below 18 years of age can invest in mutual funds with the help of their parents or legal guardians. The account will be in the name of the minor. Since minors are not allowed to make financial decisions themselves, parents or legal guardians can act as custodians of their account.
Joint holding is not allowed in a minor’s mutual fund folio. This means that a joint account cannot be opened in the name of a minor and their legal guardian.
To start investing in mutual funds in the name of a minor, certain documents are required. These include a birth certificate as proof of the minor’s relationship, and valid bank proof such as a cancelled cheque, bank passbook, or bank statement from the last 90 days. Transactions in the minor’s bank account can be done through their own bank account, a joint account with parents or legal guardians, or the bank account of parents or legal guardians.
However, when the child turns 18, the guardian must update the minor’s account status from minor to major. A request must be made, and proof of the child’s age must be provided, along with filling out a new KYC form. Failure to do so will result in all transactions being stopped from the account.
Speaking of taxes, until the child becomes an adult, all returns received from their folios will be considered part of the guardian’s income and taxed accordingly. When the child turns 18, they will be considered a separate entity for tax purposes and will be required to file their taxes.