Nomination mandatory for demat accounts, MF folios from Sept 1: What if you don't want a nominee?

The Securities and Exchange Board of India (SEBI) in May modified the norms for nomination in single-holder demat accounts and mutual fund folios, with the revised rules coming into effect from September 1. 2026.

In a circular dated May 29, 2026, Sebi said the modification will “enhance the ease of investor onboarding and ease the nomination process.”

The new rule has been introduced to ensure that every investor clearly records their nomination preference, helping streamline the transfer of securities and reduce complications for family members or legal heirs after the investor’s death.

What changes for investors from September 1?

Under these guidelines, investors cannot leave the nomination field blank. They either have to submit a nominee's details or a signed declaration to opt out at the time of opening an account or for existing folios.

However, nomination will be optional for jointly held demat accounts or mutual fund folios. In such cases, the consent of all joint-holders will be required for mentioning or changing a nominee.

An investor can appoint up to three nominees and specify the percentage share to be allocated to each of them. If no specific allocation is mentioned, the assets will be divided equally among all the nominees.

In case the division results in any odd lot or fractional balance, the remaining units or securities will be transferred to the first nominee listed in the nomination form, as per the distribution rules.

What happens if you don't want a nominee?

Investors who do not wish to appoint a nominee can formally opt out by submitting the prescribed declaration. You can do so by logging in to your broker, bank, or mutual fund platform account.

All you need to do is navigate to the nomination or nominee details tab and then select the option to opt out instead of adding a nominee.

This option allows the folio holder to record their decision while remaining compliant with regulatory requirements.

Who receives the assets if no nominee is registered?

If no nominee is registered, the holdings are transferred to legal heirs through the securities transmission facility. Until now, this process was paperwork-heavy and time-consuming but Sebi has also simplified this procedure to some extent.

At the market regulator's board meeting on June 19, it unveiled a new category called quick transmission processing (QTP) for small-value claims and doubled thresholds for transmission.

The facility will apply to claims of up to ₹10,000 for physical holdings and up to ₹30,000 for dematerialised holdings. This aims to facilitate efficient processing of such claims with minimal documentation requirement.

Further, limits for simplified documentation have also been doubled from ₹5 lakh to ₹10 lakh for physical holdings per listed company and from ₹15 lakh to ₹30 lakh for dematerialised holdings per beneficial owner, the regulator noted.

Common mistakes to avoid while nominating

Investors often make some errors when it comes to nomination. Here are some common ones that you must be aware of:

• Not registering a nominee.
• Providing incorrect nominee details.
• Failing to update nominees after major life events such as marriage, divorce, death of an existing nominee, or birth of a child.
• Providing incorrect percentage allocation among multiple nominees.
• Assuming a nominee automatically becomes the legal owner upon the investor's death.

The process for transferring holdings after the original investor's death differs across mutual funds, demat shares and physical share certificates.

For mutual funds, a transmission request must be submitted to the asset management company or its registrar, which typically processes it based on a standard set of documents. Meanwhile, demat shares are transferred through the investor's depository participant linked to NSDL or CDSL.

Physical share certificates tend to be more cumbersome. Claimants are required to submit the original certificates along with the necessary transmission documents to the company's registrar and transfer agent.