Can minors invest in Mutual Funds?
Yes, minors can invest in mutual funds in India, but there are some restrictions and guidelines to follow.
As per the Securities and Exchange Board of India (SEBI) guidelines, a minor can invest in mutual funds only through a guardian. The guardian needs to be the parent or a court-appointed legal guardian of the minor. The guardian needs to be named as the first holder and the minor as the second holder in the mutual fund investment.
The minor cannot transact in the mutual fund account until he or she reaches the age of majority (18 years), after which the account will be converted into a regular account, and the minor will become the first holder.
It's important to note that the investments made on behalf of the minor are considered a gift, and any income or gains from the investment will be taxable in the hands of the minor. The income tax rules for minors apply to mutual fund investments as well.
Before investing on behalf of a minor, it's important to carefully consider the investment goals, risk tolerance, and overall financial situation, and to consult with a financial professional to help determine which mutual funds may be most suitable for the minor's needs.