Can minors invest in mutual funds? Still, wondering?
If you are under 18 and thinking about investing, then my dear, you may have a great future ahead of you.
Investing in mutual funds, stock market, equities, liquid funds, etc. brings a lot of passive wealth if done right. Well, we offer courses and blogs on mutual funds and how to invest in them. You can view them anytime you want to.
For now, let us talk about whether you can invest in mutual funds or not if you are a minor or somebody aged below 18.
To answer your question, if you are under 18 (minor) and wish to invest in mutual funds schemes, then you can do so with the help of your parents or legal guardians. You or the minor needs to be the sole account holder represented by the parent/guardian.
Remember that in a minor’s Mutual Fund portfolio, joint holding isn’t allowed. It’s important for the one to have an investment objective for the minor that is supposed to be achieved by investing in Mutual Funds. For example, funding higher education, etc.
Once you attain the age of 18 and turn into a major, the first thing you a parent/guardian need to do is to change the status of the sole account holder from Minor to Major.
Note: If you don’t change the status of the sole account holder from Minor to Major after attaining the age of 18, then all the transactions would be frozen in the account.
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Until you achieve the age of 18, your portfolio is clubbed under your parent’s or guardian’s income and hence, the parent pays the applicable taxes. However, once you turn 18, the taxes would be borne by the sole account holder as applicable to any other investor above the age of 18 years. This means it will be borne by you.
The year you turn major, you will be considered as a separate entity and will pay taxes for the number of months for which you are a major in that year.
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The market regulator SEBI, on 24th December 2019, issued a circular for investment by minors and clarified that such investments can only be made from the minor’s account or joint account of the guardian and minor.
As per the SEBI circular, the minor is obligated to update his/her KYC and bank account details with an original cancelled cheque on attaining the age of majority or 18 years.
Until this is done, no further transactions will be permitted in the account. Furthermore, all standing instructions such as Systematic Withdrawal Plans (SWPs), Systematic Investment Plans (SIPs), and Systematic Transfer Plans (STPs) will be suspended.
In case you have any queries related to the mutual fund investment, do let us know in the comment section below. We will get back to you asap.
Until then, happy investing!