Mutual funds are very popular because of the various features of SIP and its returns. But if someone is below 18 years of age and wants to invest in SIP, can he do so? Let us tell you what are the rules regarding minors in SIP.
Mutual funds are considered to be a very good scheme in terms of investment. This scheme has become very popular over time. Despite being market linked, this scheme gives a good return in the long term. Experts consider its average return to be 12 percent. Apart from this, flexibility is available in mutual funds. A person can start investing in this scheme with Rs 500 and can also increase the amount to be invested over time and if there is any kind of financial problem, then it can also be paused for some time in between.
Considering all these features and better returns, this scheme is very much liked. But if someone is below 18 years of age and wants to invest in SIP, can he do so? Let us tell you what are the rules regarding minors in SIP.
These are the rules for minors
There is no limit on the age of investment and the amount of investment in SIP. The sooner you invest in it, the sooner you will be able to get better benefits. But for minors below 18 years of age, investment can be made by their parents or legal guardians. But in such cases, the child will be the sole holder, joint holders will not be allowed.
These documents will be needed
While investing in the case of a minor, you have to provide proof of the age of the child and your relationship with the child. For this, as proof of the date of birth of the minor and the relationship of the guardian (natural or legal guardian), the child’s birth certificate, passport or any such valid document will have to be given, which contains the information about the age of the minor and his relationship with the guardian. At the same time, it is necessary for the guardian to follow the regulations related to Know Your Customer. Transactions can be done directly from the child’s account, but if it has to be done through the parent’s bank account, then you will also have to submit a third party declaration form.
On turning 18
All these rules will be applicable till the child is a minor. Parents will have to stop SIP as soon as the child turns 18. Before the minor turns 18, a notice will be sent to the unit holder at his registered correspondence address. In this notice, the minor will be informed about the need to submit an application along with the prescribed documents to change his status in the investment from ‘minor’ to ‘major’.
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