Mutual Funds: Investing in the Name of a Minor

It is possible for a child below the age of 18 years to invest in any mutual fund scheme under their name. Also, there is no restriction on the amount to be invested. Any amount of money given in the form of a gift from a grandparent or any other relative can be utilised to invest in a mutual fund scheme. 

Unlike a bank account, the child will continue to hold the mutual fund portfolio in their name only. However, the portfolio will have a guardian, which could be either of the parent, or someone appointed by a court of law. 

Once the child attains 18 years of age, the asset management company (AMC) or fund house will cease the systematic investment plans (SIPs) in all mutual funds. A process to change the status of the savings bank account from minor to major would be required to be initiated. It is possible to re-invest in the same folios, once this process to convert to major is undertaken. 

The documentation required to open a mutual funds folio for a minor include: proof of age and the date of birth certificate and a document where the relationship of the guardian and a parent is stated with the minor. 

In addition, in case a minor is opening a mutual fund folio with the guidance of a guardian, then a copy of the court order will be required submitted. Also, the parent or the guardian needs to provide the Know Your Customer (KYC) information, as per the Securities and Exchange Board of India (SEBI) guidelines.  

After the minor attains 18 years of age, they will be required to go through the entire process of KYC in their own name. 

In another scenario, if a minor or the guardian who is linked with a mutual funds folio wants to introduce a change. A no-objection certificate (NOC) from their end is required to be furnished. 

In addition, a court order has to be passed for the appointment of a new guardian, and they also have to go through the KYC process as per the SEBI regulations before becoming their guardian to a minor.

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