The Securities and Exchange Board of India (SEBI) has introduced revised nomination rules for mutual fund folios and demat accounts, effective March 1, 2025. These updates aim to provide investors with more flexibility in asset distribution and simplify the inheritance process for nominees.
Key Highlights of the New Nomination Rules
1. Increased Number of Nominees
- Investors can now appoint up to 10 nominees for each mutual fund folio or demat account.
- Only the investor can make these nominations—a Power of Attorney (PoA) holder is not authorized to declare nominees.
2. Required Details for Nominees
To register a nominee, the investor must provide:
- Full name
- Contact details (address, email, and phone number)
- Date of birth
- Relationship with the investor
- One of the following identifiers:
- Permanent Account Number (PAN)
- Driving license number
- Last four digits of Aadhaar number
Note: Investors only need to provide the document number, not submit physical copies.
3. Nominee Share Allocation in Investments
- Investors can specify the exact percentage or absolute value of their assets for each nominee.
- This allocation can be modified at any time without restrictions.
For example, if an investor has ₹1 crore in mutual funds, they can allocate:
- 50% (₹50 lakh) to their spouse
- 30% (₹30 lakh) to their child
- 20% (₹20 lakh) to their parents
This ensures a clear distribution plan and avoids inheritance disputes.
4. Asset Transfer Process After Investor’s Demise
- If nominations are registered: The assets will be transferred directly to the nominees as per the percentage allocated.
- If no nominations are made: The legal heirs must provide succession certificates or probate documents to claim the assets.
Nominees can:
- Continue as joint holders with other nominees
- Open separate individual accounts for their share
5. Required Documents for Asset Transfer
To claim the assets, nominees must submit the following:
- Death certificate of the investor
- Nominee’s identity proof (PAN, Aadhaar, or passport)
- Bank account details of the nominee for fund transfer
- Transmission request form (provided by the financial institution)
For large investment portfolios, additional documents like succession certificates or a will copy may be required.
6. What Happens If the Investor Becomes Incapacitated?
- If an investor loses physical ability but is mentally capable, nominees can manage the account under SEBI’s new process.
- An official from the financial institution will visit the investor to verify their consent before approving transactions.
- If needed, the investor can provide a thumb impression or mark in the presence of a witness.
This rule ensures that investment portfolios remain active and that financial decisions are not stalled due to medical conditions.
Example Scenario
Mr. Arjun, an investor, has a mutual fund portfolio worth ₹2 crore. Under the new rules, he:
- Registers 4 nominees – his spouse, two children, and his brother.
- Allocates 40% to his wife, 30% to his daughter, 20% to his son, and 10% to his brother.
- In case of his demise, his nominees can seamlessly claim their share without legal complications.
Conclusion
The SEBI nomination rule changes from March 1, 2025, bring greater transparency and ease in asset transfer. Investors should:
- Update their nominee details as per the new provisions.
- Ensure correct document submissions to avoid future legal hassles.
- Inform their family members about their investments and nominee details for a smooth transition.
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This blog is purely for educational purposes. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
