The folio works exactly like yours for seventeen years and 364 days. Then it stops cold until your adult child does paperwork.
Short answer: a mutual fund folio can be opened in a minor's name — sole holding only, no joint holders — operated by a parent or court-appointed guardian, funded from the child's or guardian's bank account. On the child's 18th birthday the folio is frozen for all transactions — SIPs stop, redemptions blocked — until the child completes fresh KYC as a major, links their own bank account and (for stocks) their own demat. Plan the freeze; don't discover it.
Folio and KYC rules per SEBI/AMFI norms applied uniformly across AMCs · Indicative, as of August 2026
Three rules trip parents at the first step: the minor must be the sole holder — no joint names, no nominee-style workarounds; the guardian must be KYC-compliant and is the only person who can transact; and the money must come from the minor's bank account or the guardian's — a grandparent's cheque cannot fund the folio directly (they gift to the child's account first; the gift rules make that clean). Date-of-birth proof is mandatory at opening, because the AMC's systems are already counting down to the freeze.
Gains realised while the child is a minor are clubbed with the higher-earning parent — equity LTCG rules apply as usual, they just apply on your return, less the ₹1,500 exemption. The practical consequence: redeeming a large gain in the child's folio in a year when your own income is at its peak is voluntary extra tax; if a redemption is coming anyway, the year you take it matters.
| What happens | Detail |
|---|---|
| Folio freezes on the 18th birthday | All transactions stop — including running SIPs and redemptions; the money stays invested and keeps compounding |
| Status change to "major" | The child completes their own KYC (PAN mandatory), submits the minor-to-major form, links a bank account in their own name |
| Mandates die | Old SIP/STP/SWP instructions lapse; each must be re-registered by the now-adult holder |
| Tax flips | From the birthday, gains are taxed in the child's own hands — usually a much lower bracket, often zero |
The freeze is a feature wearing the costume of a bug: it forces the corpus into the adult child's own legal control, which is precisely the point of investing in their name. The cost is 2–6 weeks of paperwork at exactly the age fees fall due — so run the status change at 18, not at 21 in the admission-fee week.
The same architecture applies to direct stocks: a minor demat account (guardian-operated) can hold and sell shares but cannot buy in the secondary market in most broker setups — gifted and IPO shares are the realistic inflows. At 18, same story: fresh KYC, own bank, own trading account. For almost every family, the mutual fund route is the simpler instrument for the same exposure.
Because the alternative — investing in your own name "for" the child — quietly fails at the handover: the money is legally yours, mixed with your goals, exposed to your creditors, and transferring it at 18+ is a second decision you may never take. A folio in the child's name is an irrevocable earmark with a built-in transfer at majority. The freeze is the price of that certainty; the tax-flip at 18 is its reward.
No — the minor must be the sole holder, with a parent or court-appointed guardian operating it. Joint holding becomes possible only after the minor-to-major conversion at 18.
The folio freezes on the 18th birthday: SIPs stop, redemptions are blocked, and the investments simply stay put until the child completes KYC as a major and re-registers mandates in their own name.
Until 18, realised gains are clubbed with the higher-earning parent (less the ₹1,500 exemption). From the 18th birthday, gains belong to the child's own return — typically a far lower slab.
Not from their own bank account — folio funding must come from the minor's or guardian's account. The clean route is a gift into the child's bank account first, which is tax-exempt from relatives.
Related: Clubbing rules · Grandparents’ guide · SIP outcomes by amount
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Written and checked by the PaisaSamajh editorial desk · Last reviewed: 24 August 2026 · How we check this →