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Investments may be made in mutual funds on behalf of minors. However, there are certain guidelines investors need to keep in mind. The guardian in the folio should either be a natural guardian (father or mother) or a court-appointed legal guardian. The date of birth of the minor would have to be provided in the application form. Along with the form, a photocopy of supporting documents like birth certificate/passport/ school leaving certificate, will have to be provided. You can also do an SIP in your child's name.
However,one must remember that the mutual fund will honor standing instructions for SIP (systematic investment plan), systematic transfer plan (STP) or systematic withdrawal plan (SWP) in a minor's folio only till the minor becomes a major (ie, 18 years of age), though the instructions may be for a period beyond that date.
WHEN MINOR BECOMES MAJOR
The guardian operates the account till the minor becomes a major. When a minor turns major, mutual funds will seek relevant documents. Also: Prior to the minor turning a major, mutual funds will send advance notice to the registered correspondence address advising the guardian and the minor to submit an application form along with the prescribed documents for changing the status of the account to "major".
The notice shall clearly state that all existing standing instructions and transactions, including SIP, STP, and SWP, registered earlier for a period beyond the date when the minor becomes a major shall be suspended. The account shall be frozen for operation by the guardian on the day the minor becomes a major and no transactions shall be permitted till the documents for changing the status as required are received. Hence, to change the status, investors on their part must submit a service request form/letter duly filled up and containing details of the fund, name of the major (investor) and folio number, along with KYC acknowledgment (of the minor who has turned major) and the signature of the minor attested by a bank manager.
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