Zerodha now allows mutual fund investments via minor's account
Zerodha, a leading online brokerage firm, has introduced a new feature that enables investors to invest in mutual funds using a minor's account. The new facility permits investors to purchase stocks, mutual funds, exchange traded funds (ETFs), government bonds, and sovereign gold bonds on behalf of their children. However, intraday and future option trading are not permitted for such accounts.
Zerodha simplifies investment process
Prior to this update, investing in mutual funds through a minor's account was a complex process. Investors were required to first purchase the mutual funds in their own account, and then transfer them off-market to the minor's demat account. Zerodha acknowledged this issue, stating that the previous method resulted in a "broken experience." The new feature aims to streamline this process and make it more user-friendly for investors.
How to use the new feature?
To utilize this new feature, investors need to open a Zerodha account in their child's name following a process provided by Zerodha. They must then log into the Zerodha account using the minor account details. Additionally, investors can set up Systematic Investment Plans (SIPs) for regular investments and automate these SIPs using mandates, which shall be activated within three working days.
Zerodha clarifies payment and redemption process
Zerodha has provided clear guidelines regarding the bank account to be used for making payments and where the mutual fund redemption amount will be credited. All transactions, both payments and redemptions, must be conducted through the minor's bank account linked with Zerodha. Any withdrawal requests from guardians or other accounts will be rejected. This measure ensures that all financial transactions are securely managed within the minor's account.
Transition to normal account and tax implications
When the minor reaches the age of 18, their Zerodha account must be converted into a normal one. It's important to note that while making investments through a minor's account, the guardian is responsible for paying taxes.
