Every mutual fund allows investments for minors. Under the age of 18, any child with the help of parents or legal guardian can invest in mutual funds. The child can only be the sole holder of the account and joint holding is not allowed in the folio. The parents or legal guardian should have a clear investment goal for the minor, like for higher education, wedding can be anything.
The Association of Mutual Fund in India (AMFI) reviewed existing guidelines for minor’s investment represented by the parent or guardian after consulting with the AMFI operations and compliance committee. The AMFI has listed the supporting documents and issued updated guidelines regarding the same.
A child becomes a major once she/he attains the age of 18, the parents/ guardian should change the status of the sole account holder from minor to major else the transaction in the account will be stopped. Now after this is done, the tax implications will have to be borne by the sole account holder like as it is applicable for any investor above the age of 18 years. The guardian or parent is allowed to operate the minor’s account only until the minor attains the age of majority.
To change the status from minor to major, as per SEBI directive, the guardian shall freeze minor’s account for operation on the day she/he attains the age of majority. Till the status is changed from minor to major no customer-initiated transactions is permitted.
To keep the account active, the minor upon whose name investment was made, after being 18 is required to provide all KYC details, updating of bank account details including the original check leaf of the new account that was cancelled.
When a minor turns major, she/he needs to submit an application requesting for a change in status from minor to major in a form called MAM form, along with other prescribed documents.
So before a requesting for change of status, the account holder should obtain a PAN card and complete KYC process to change the status in his/her existing account from minor to major or open a new bank account in his/her name and procure a new chequebook with his/her name printed on.