Udayan Adhyes Financial Insights: Starting a SIP Investment for Your Child

In the dynamic world of personal finance, making informed decisions about investments for your child's future is crucial. Udayan Adhye, a renowned finance influencer and digital creator, addresses a vital question many parents have: Is it possible to start a SIP (Systematic Investment Plan) investment for a child who is under 18? Adhye breaks down five important aspects of this process, offering valuable insights for parents and guardians looking to secure their child's financial future.

Understanding SIP Investment for Minors

1. No Limit on Investment Amount:

• Parents and guardians can start a SIP for their child without any restriction on the investment amount.
• This flexibility allows for tailoring the investment based on the child's future needs and financial goals.

2. Sole Holder with Guardian Appointment:

• The child will be the sole holder of the mutual fund portfolio, with no provision for joint holders.
• A guardian, either a parent or a court-appointed legal guardian, must be appointed to manage the account until the child turns 18.

3. Documentation Requirements:

• Essential documents include the child's date of birth proof, such as an Aadhaar card, passport, or birth certificate.
• The appointed guardian must be KYC registered and provide their PAN card as part of the documentation process.

4. Investment and Redemption Process:

• Investments into the minor's portfolio can be made from various sources: the minor's bank account, a joint account with the parent/guardian, or directly from the guardian's account post 15th June 2023.
• Upon turning 18, the minor must transition their account status from minor to major to access the funds.
• At the time of redemption, it is mandatory for the minor to have an independent bank account.

5. Tax Implications on Withdrawal:

• If investments are withdrawn before the child turns 18, the capital gains tax is applicable to the parent or guardian.
• Post the child turns 18, any capital gains tax incurred on withdrawals is the responsibility of the child.

6. The Benefit of Child-Specific Investments:

• Investing in your child's name helps in distinctly segregating funds meant for the child's future, reducing the likelihood of these funds being used for other purposes.
• A regular SIP, even with a modest amount and a 5% step-up, can accumulate to a significant sum over 18 years, potentially reaching nearly 1 crore.

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Udayan Adhye's insights provide a clear and structured approach to starting a SIP investment for minors. Understanding these key points can empower parents and guardians to make informed decisions, ensuring a secure and well-planned financial future for their children.