Demat Nomination and Transmission: A Simple Legal Guide
Nomination is the instruction you give your depository participant about who should receive the securities in your demat account after your death. Transmission is the process by which those securities actually move into the nominee’s or heir’s demat account, and it is far quicker when a valid nomination exists.
A nominee is the person authorised to receive your holdings, while the legal heir under a will or succession law is the person entitled to own them, and the two are not always the same person. Indian courts have treated the nominee as a receiver holding on behalf of the estate.
Below: the paperwork, single versus joint holdings, the no-nominee case, the tax position for the heir, and the gaps that stall families for months.
Nomination and transmission do different jobs
Nomination is the signpost. Transmission is the journey.
What nomination does
You file a nomination with your depository participant at account opening or later. You can name more than one nominee and set the percentage each receives, the percentages must total 100, and a minor nominee needs guardian details too.
SEBI does not force you to nominate, but it does require a choice on record: either nominate, or sign an explicit opt-out declaration. Accounts that ignore both requests can face operational restrictions, so check your status once. If you are still setting things up, see our guide to opening a demat and trading account.
What transmission does
Transmission is the transfer of securities on the death of a holder. It is legally distinct from a normal transfer, and that matters in three ways.
- No stamp duty applies, unlike a gift or an off-market sale.
- No capital gains tax arises at transmission, because it is not a sale.
- The original cost of acquisition and date of purchase carry over to the person receiving the shares.
The third point has real money in it, as the worked example shows.
Does the nominee become the owner of the shares?
Not automatically. The nominee gets custody and the right to have the securities moved into their own demat account. Whether they keep them depends on succession law.
If there is a will, the will decides who inherits. With no will, personal succession law decides. A nominee who is not the rightful heir holds the assets for the estate. In most families the nominee and the heir are the same person; in blended families, or where a nomination was filed decades ago, they diverge.
Nomination speeds up access, a will settles ownership. Do both. They are not substitutes.
How to add, change or opt out of nomination
The process is short. Most depository participants now allow it online with an OTP or e-sign.
- Log in to your broker or DP portal and open the nomination or profile section.
- Choose to add, replace or opt out. Replacing overrides the earlier nomination entirely; there is no partial edit.
- Enter each nominee’s full name, date of birth, relationship, address and percentage share, plus guardian details if a nominee is a minor.
- Authenticate with OTP or e-sign. Some DPs still require a wet-signature form, and joint accounts need all holders to sign.
- Download the confirmation and check it reflects on your client master report. That is the only proof the change went through.
Redo this after any marriage, divorce, birth or death in the family.
What documents does transmission need?
It depends on how the account was held and whether a nomination existed.
| Scenario | Who receives the securities | Core documents | Typical difficulty |
|---|---|---|---|
| Joint holding, one holder dies | Surviving holder or holders | Transmission request form, notarised death certificate copy | Lowest, nominee not involved yet |
| Single holding with a valid nomination | Registered nominee or nominees | The above, plus nominee’s client master report, PAN and KYC | Low |
| Single holding, no nomination, value below the depository threshold | Legal heirs | The above, plus affidavit, no-objection letters from other heirs, indemnity bond, heirship proof | Moderate |
| Single holding, no nomination, value above the threshold | Legal heirs | The above, plus succession certificate, probate or letter of administration | High, court process, months |
The value threshold that decides between the affidavit route and the court route is set by the depositories and revised periodically. Confirm the current figure with your DP or on the NSDL or CDSL website. It also helps to understand what a depository participant actually does before you start chasing paperwork.
SEBI has also set up a way to report an investor’s demise once, through a KYC registration agency, so intermediaries are alerted together. Ask your DP how to use it.
A worked example: three nominees and one tax bill
Suppose a single-holder demat account holds securities worth Rs 18,00,000 on the date of death, with three registered nominees at 50%, 30% and 20%.
- Nominee A receives 50% of each holding, worth Rs 9,00,000
- Nominee B receives 30%, worth Rs 5,40,000
- Nominee C receives 20%, worth Rs 3,60,000
Nothing is taxed at this point, because transmission is not a sale.
Now follow one holding. Inside Nominee A’s share are 500 shares the deceased bought in 2019 at Rs 400 each. Nominee A sells them a year later at Rs 700.
Because the cost and purchase date carry over, the gain is 500 multiplied by (700 minus 400), or Rs 1,50,000, and the 2019 purchase date makes it long term.
Long term gains on listed equity are taxed at 12.5%, with the first Rs 1.25 lakh of LTCG in a financial year exempt. Taxable LTCG is therefore Rs 25,000, and tax at 12.5% works out to Rs 3,125. Treated as a fresh Rs 3,50,000 gain instead, the bill would have been far larger, which is why the transmission paper trail is worth keeping.
The mistakes that cost families months
These come up again and again.
- No nominee on a single-holder account. The biggest cause of delay, and it turns a two-week task into a court matter.
- The nominee has no demat account. Securities can only move into a demat account, so the nominee must open one. Doing that after the death adds weeks.
- Forgetting the other accounts. Mutual fund folios, bank accounts and insurance each carry separate nominations. One list of every folio and account number saves the family from guessing; our note on the mutual fund folio number shows where to find those identifiers.
- Assuming a will replaces nomination. A will governs ownership but gives the DP no instruction, so transmission still needs the full document set.
Frequently Asked Questions
Can I nominate someone who is not a family member?
Yes. There is no requirement that a nominee be a relative, so a friend or a caregiver can be named. What you cannot do is override succession law: if the nominee is not the legal heir, they receive the securities but hold them for the estate.
What happens if the nominee dies before the account holder?
The nomination lapses for that person. If you named multiple nominees, the surviving nominees do not automatically absorb the deceased nominee’s share, so the account can end up partly unnominated. File a fresh nomination whenever a nominee dies. This is a common gap in nominations filed twenty years ago and never revisited.
How long does demat transmission usually take?
With a valid nomination and a complete document set, depositories expect the DP to process it in a short window, typically a couple of weeks. Without a nomination and above the value threshold, the timeline depends on how long a succession certificate or probate takes from the court, often several months.
Do I have to pay anything to transmit shares to a nominee?
There is no stamp duty and no capital gains tax on transmission itself. Costs are administrative: notarising the death certificate copy, an indemnity bond or affidavit on stamp paper, court fees in the probate route, and DP charges. Ask your DP for its charge schedule in writing.
Can a nominee sell the shares immediately after transmission?
Once the securities are in the nominee’s own demat account they can be sold like any holding. Whether they should is a separate question, because a nominee who is not the sole legal heir may have to account for the proceeds to the estate. Settle ownership before selling.
Key Takeaways
- Nomination decides who receives your securities; a will decides who owns them. File both and keep both current.
- SEBI requires a positive choice on record: either nominate, or sign an opt-out declaration with your DP.
- A single-holder account with no nominee is the worst case, and above the depository’s value threshold it needs a succession certificate or probate.
- Transmission attracts no stamp duty and no capital gains tax, and the deceased’s cost of acquisition and purchase date carry over to the recipient.
- On the carried-over basis, a Rs 1,50,000 long term gain becomes Rs 25,000 taxable after the Rs 1.25 lakh exemption, or Rs 3,125 in tax at 12.5%.
- The nominee must already hold a demat account, so check that well before it is needed.
