Planning, worked examples and checklists
Demat and mutual fund nomination: SEBI rules, multiple nominees and transmission to heirs
Demat and mutual fund nominations under SEBI rules: multiple nominees, opt-out, transmission after death and why nominees hold for heirs.
For demat accounts and mutual fund folios, SEBI's rules let you name several nominees with a percentage for each, or formally opt out of nomination by declaration. SEBI's January 2025 circular revamping nomination (in effect from 1 March 2025) allowed up to ten nominees, but after operational complaints SEBI replaced it: its circular of 29 May 2026 (SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2026/12676), in effect from 1 September 2026, allows up to three nominees, needs only each nominee's name and relationship (date of birth for a minor), and applies to existing accounts and folios too. After a death, the units or shares are transmitted to the nominee (or to the surviving joint holder) on a transmission request and death certificate. As with banks, the nominee generally receives them for the benefit of the legal heirs: in Shakti Yezdani v. Jayanand Jayant Salgaonkar (December 2023), the Supreme Court held that nomination under the Companies Act and the Depositories Act does not override the law of succession.
This guide is part of the estate planning checklist. For bank accounts, see bank nominations.
Where nominations are held
| Holding | Who records the nomination | How to update |
|---|---|---|
| Shares, bonds, ETFs in demat form | Your depository participant (DP), for NSDL or CDSL | DP's online form with e-sign or OTP, or a physical form |
| Mutual funds held in demat | The DP | Same as above |
| Mutual fund units in statement (non-demat) form | Each AMC's registrar and transfer agent | Online through the AMC, the registrar or the MF Central portal; separate for each folio unless updated together |
| Physical share certificates | The company's registrar | Form SH-13 under the Companies Act (and convert to demat) |
Key features of the SEBI framework
- Up to three nominees, with an optional percentage share for each; if you do not state shares, the assets are split equally, and any odd lot goes to the first nominee named
- Mandatory details are minimal: the nominee's name and relationship (plus date of birth for a minor). Mobile, email, an identifier (PAN, last four digits of Aadhaar, driving licence or passport) and guardian details are optional, but they help the DP or registrar trace the nominee
- Single-holder accounts and folios opened on or after 1 September 2026 must have a nomination unless you sign the opt-out declaration (on paper, or by accepting the declaration online). Nomination is optional for joint holdings, and all joint holders must consent to adding or changing a nominee
- Online nominations are validated by digital signature, Aadhaar e-sign or OTP-based two-factor authentication; paper forms need only your signature, with two witnesses only if you use a thumb impression
- You can change or cancel nominations any number of times, and the DP or registrar must acknowledge each one
- After the investor's death, multiple nominees can continue in the same account or folio or open separate ones for their shares
- Joint holdings: on a holder's death, assets pass to the surviving joint holder(s). The nominee comes in only when all joint holders have died. Moving assets to the survivor is not treated as transmission to heirs.
Nominee vs legal heir for securities
Before 2023, several High Court decisions disagreed on whether a nominee of shares became the absolute owner. In Shakti Yezdani, the Supreme Court settled it: the nomination provisions in the Companies Act, 2013 (section 72) and the Depositories Act deal with who receives the securities, not with succession. The legal heirs, or the beneficiaries under a will, can claim from the nominee.
What this means in practice:
- The DP or registrar transmits to the nominee and is discharged. It does not decide disputes.
- Heirs who disagree must take it up with the nominee, by negotiation, mediation or a civil suit.
- To give the shares to the nominee for good, say so in your will.
Transmission after death: documents
| Situation | Typical documents |
|---|---|
| Nominee claims | Transmission request form, death certificate (notarised or attested copy), nominee's KYC and client master list of the nominee's own demat account |
| Surviving joint holder | Transmission form, death certificate, survivor's KYC |
| No nominee, value below the simplified-documentation limit | Transmission form, death certificate, affidavit and indemnity from the claimant, no-objection letters from other heirs, and a legal heir certificate or similar document |
| No nominee, value above that limit or a dispute | Succession certificate, probate or letters of administration, or a court order |
Value limits for simplified documentation are set by SEBI and the depositories and have been revised over time. Ask the DP or registrar for the current figure.
Worked example (illustrative)
Prakash, a widower, holds a demat account with shares worth ₹40 lakh and mutual fund folios worth ₹15 lakh. His three children are adults.
- Demat: He names all three as nominees at 40%, 30% and 30%, because one child cares for him. On his death, the DP transmits 40% of each holding to that child and 30% to each of the others.
- Folios: He forgot one old folio of ₹2 lakh, which has his late wife as nominee. With no living nominee, the children must use the transmission route for un-nominated holdings: claim form, affidavits, no-objection letters and heirship proof.
- Will: His will says the children take "in the same proportions as my nominations". This matches nominations and ownership and reduces the risk of a dispute.
Tax on transmission and later sale
Transmission to a nominee or heir is not a sale and is not taxed. When the heir sells, the cost and holding period of the deceased generally apply. See inherited property tax. Capital gains rates are covered on the official Income Tax portal.
Checklist
- Check nominations in every demat account and folio, including old ones
- Use percentages if you have more than one nominee
- Opt out formally only if you are sure; heirs will face more paperwork
- Keep a list of DPs, folio numbers and the registrar for each fund house
- Make your will consistent with your nominations
Frequently asked questions
Is a nominee in a demat account the owner of the shares?
Generally no. Following Shakti Yezdani (2023), the nominee receives the shares but the legal heirs or will beneficiaries are entitled to them. Insurance is a different case.
Will my demat account be frozen if I have not nominated?
No. SEBI dropped account freezing for not updating nomination for existing accounts in June 2024. Under the May 2026 circular, single-holder accounts and folios opened from 1 September 2026 need either a nomination or an opt-out declaration, and investors without a nomination get twice-yearly reminders by email and SMS.
Can I name a minor as a nominee?
Yes, with a guardian's details. The guardian handles the assets until the minor is an adult.
Do I need to update nominations in each mutual fund separately?
For non-demat units, nominations are recorded folio by folio, but platforms such as the registrars' portals or MF Central let you update many folios together.
Sources
- Securities and Exchange Board of India — circular SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2026/12676 of 29 May 2026 on nomination in demat accounts and MF folios
- NSDL and CDSL — depository forms and transmission procedure
- AMFI — mutual fund investor information
- Supreme Court of India — Shakti Yezdani v. Jayanand Jayant Salgaonkar (2023)
