The Securities and Exchange Board of India (SEBI) has issued a circular revising the circular revising nomination norms for Demat accounts and mutual fund folios.
The background is that the SEBI issued a circular (SEBI/HO/OIAE/OIAE_IAD-3/P/ON/2025/01650) on January 10, 2025, revising the nomination norms for demat accounts and mutual fund (MF) folios to enhance clarity and ease of compliance. The revisions come in response to stakeholder feedback and detailed discussions.
It is clarified through the present circular that under the revised framework, in case of joint holdings, upon the demise of one or more joint holders, the assets will be transmitted to the surviving holder(s) through name deletion. Surviving joint holders will also have the option to transfer assets into an existing or new account.
HUF Taxation Simplified – Are You Managing Your Family’s Wealth the Right Way?
For investors with single holdings, the option to opt out of nomination is permitted through both online and offline modes, as per Clause 3.10 of the circular. Additionally, single-account holders can now empower a nominee (except minors) to operate their account in case of physical incapacitation, with the flexibility to change the nominee any number of times.
The circular also simplifies the Know Your Customer (KYC) process for joint holders. Regulated entities cannot reject name deletion-based transmissions due to non-submission of KYC documents unless they were previously requested but not provided. Surviving holders will be allowed to update their personal details, including address, mobile number, and bank account, either at the time of transmission or later. Furthermore, credit transactions, including corporate actions, will continue in such accounts.
For demat and MF folios, the revised guidelines ensure greater flexibility in opting out of nominations. Investors opening new accounts online must opt out digitally, while those opening accounts offline must use the physical mode. Existing investors can choose either mode. Depository Participants (DPs) will provide the opt-out mechanism for demat accounts.
Additionally, SEBI has clarified that in cases where multiple nominees are designated, any fractional share of assets will be assigned to the first nominee listed in the nomination form. The amendment also explicitly allows passport numbers as valid identity proof for Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs).
HUF Taxation Simplified – Are You Managing Your Family’s Wealth the Right Way?
Further refinements include updates to the nomination forms, ensuring uniformity in the process across market participants. Signatures on nomination forms must align with the mode of holding in folios and demat accounts, and a witness signature column has been added. Investors in “Either or Survivor” accounts can now modify nominations independently, while in jointly held accounts, all holders must approve changes.
To facilitate better implementation, SEBI has directed the Association of Mutual Funds in India (AMFI) and depositories to submit periodic compliance updates. Interim readiness reports are due by May 1, 2025, and August 1, 2025, while final implementation status reports are required by November 1, 2025. Additionally, SEBI has decided to phase in the implementation of certain provisions instead of enforcing them all from March 1, 2025.
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