Zerodha Kids account: Know how to open a trading account for children online and offline, AMC charges and other details

Brokerage firm Zerodha has rolled out a new service on Thursday, January 25 in which parents can open trading accounts for their kids.

"The one thing we also wanted to do was help parents save and invest simply and easily for their kid’s future. We’re happy to announce that you can now open a Zerodha account for your kids online and invest in stocks, mutual funds, and bonds with your kids. To encourage more parents to invest together with their kids, we made minor account opening free and are also waiving off the annual maintenance charges (AMC)," Zerodha said in one of its blog posts.

Zerodha: How to open a minor's account?

Online account: To register an online account, both the minor and the guardian must have their Aadhaar connected to a mobile number. Additionally, the guardian must have an existing Zerodha account. When the minor's Aadhaar is not connected to a mobile number, or if the minor does not have an Aadhaar, the account must be created offline.

Visit this link and follow the steps to open an account online. 

After all the documents are verified, the minor account will be opened within 48 hours.

Offline account: In case, a minor doesn't have Aadhaar linked to a mobile number or if the minor does not have an Aadhaar, the account can only be opened offline. The guardian should sign all the forms and supporting documents on behalf of the minor. Documents like PAN, Aadhaar number, birth certificate or school leaving certificate, mark sheet issued by a higher secondary board or passport as proof of date of birth, a recent photo, copy of cancelled cheque or bank statement, and legal guardian letter.

Zerodha: How does a minor's account work?

The guardian has complete authority over the minor's Zerodha account. Minors cannot purchase shares on their own, however, they can only track and sell their portfolio holdings. One can either gift securities to the minor or the minor might request their guardian to purchase and gift securities to them. One can purchase stocks, mutual funds, exchange-traded funds (ETFs), government bonds, and sovereign gold bonds on behalf of their child and then gift them. Minor accounts cannot engage in intraday or F&O trading.  There is a Family Accounts feature on the Console (Zerodha's online back-office platform) that allows one to track their own portfolio and their children's portfolios simultaneously.

What happens when minor turns 18?

When a minor turns 18 years old, a new KYC is required, and the minor account needs to be changed to an individual account.

What are the tax implications for a minor account?

A minor can earn just two types of income: capital gains and dividend income. This income is combined with that of the higher-earning parent, and they are responsible for the total tax burden.

What are the trading restrictions in a minor account?

Minors cannot buy shares and can only be transferred to the minor's account. They also cannot place mutual fund and government securities orders, and any intraday and F&O orders. However, minors can sell holdings from their demat account, and can also apply for IPOs, buybacks, and takeovers.