Can minors dive into mutual funds SIPs? Know what AMFI guidelines state

Mutual funds for minors: Are you considering investing in mutual funds for your child's future, but unsure about the process for minors? Investing in mutual funds via SIPs for minors requires adherence to specific rules laid down by the Association of Mutual Funds in India (AMFI).  Parents keen on securing their child's future can make investments on their behalf, catering to various purposes such as education, marriage, or healthcare.

 

Essential papers for minors' mutual fund entry

To initiate a mutual fund investment under a minor's name, certain documentation is imperative as per AMFI regulations. These include the minor's birth certificate, school-leaving certificate, and documents establishing the guardian's relationship with the minor. Natural guardians must furnish proof of their relationship, while court-appointed guardians need to provide a copy of the court order designating them as legal guardians.

Additionally, guardians are mandated to submit their PAN details, bank account information, and complete KYC data. Payments for investments will be made from the guardian's bank account, although the minor retains sole ownership of the investment. Notably, the minor's account cannot have joint ownership, and no nominee can be added.

What stock trading restrictions apply to minors?

Minors are also allowed to invest in Indian stocks, with their guardians operating their demat and bank accounts. However, minors are restricted from engaging in equity intraday, equity derivative, or currency derivative trading, and can only partake in equity delivery trades.

Upon reaching 18 years of age, the minor can transition the account to their name by completing the minor-to-major (MAM) form and fulfilling other requirements, including submitting their PAN and KYC details. During this transition, dividend payments will continue to be credited to the account holder's bank account or reinvested in the portfolio.

Notably, monetary transactions cannot be conducted until the MAM procedure is finalised. Nonetheless, payments will be processed according to the unitholder's preferences, either deposited into the designated bank account or reinvested as applicable.