India's capital markets regulator, SEBI, has introduced a revised nomination framework set to take effect from September 1, 2026. This significant change allows investors to appoint up to three nominees for their single-holder demat accounts and mutual fund folios, enhancing the process of asset transmission upon an investor's demise.
Flexible Asset Distribution Among Nominees
Under the updated regulations, investors gain the flexibility to specify how their securities and mutual fund units should be distributed among their chosen nominees. By indicating a percentage share for each nominee, investors can ensure their assets are divided according to their precise wishes, rather than a generic or unclear allocation.
For instance, an investor might nominate three family members and allocate holdings in a 50:30:20 ratio. The specified percentages in the nomination form will legally determine each nominee's share.
Default Allocation if Percentages Are Not Specified
Should an investor appoint multiple nominees but choose not to specify individual percentage allocations, the assets will be divided equally among all registered nominees. For example, if two nominees are named without specified shares, each will receive 50% of the assets. Similarly, three nominees without specific allocations would each receive one-third.
In cases where an equal division results in odd lots or fractional balances, the remaining securities or units will be transferred to the first nominee listed in the nomination form, ensuring a clear distribution.
Mandatory Nomination or Formal Opt-Out
From September 1, 2026, investors will no longer be able to leave the nomination field blank when opening a new single-holder demat account or registering a mutual fund folio. Instead, they must either provide complete nominee details or submit a signed declaration formally opting out of the nomination process. This ensures that every account has a recorded decision regarding asset succession.
Nomination for Joint Accounts Remains Optional
The revised nomination requirements apply differently to jointly held accounts. For jointly held demat accounts and mutual fund folios, nomination will continue to be optional. Any nomination or subsequent change to an existing nomination in such accounts will require the explicit consent of all joint holders.
Reviewing and Updating Nominations is Crucial
Investors are strongly advised to periodically review and update their nominee details to ensure they accurately reflect current wishes and family circumstances. An outdated nomination can lead to significant complications for legal heirs during a difficult time. Major life events, such as marriage, divorce, the death of an existing nominee, or the birth of a child, should prompt an immediate review and update of nomination records.
While the nomination process streamlines the transmission of investments, it is important to remember that a nominee does not automatically become the legal owner of the assets; succession rights may involve separate legal considerations.