SEBI Nomination Rules from September 1, 2026: Demat and Mutual Fund Guide

The Securities and Exchange Board of India has revised the nomination process for demat accounts and mutual fund folios. The changes take effect on September 1, 2026, and are intended to make account opening simpler while ensuring that investors make a clear decision about nomination.

The revised framework applies particularly to new demat accounts and mutual fund folios held in a single name. An investor opening such an account must either register a nominee or formally declare that they do not wish to nominate anyone.

This does not mean that SEBI is forcing every investor to appoint a nominee. The requirement is to record an explicit choice instead of leaving the nomination section unanswered.

What Changes on September 1, 2026?

For a new single-holder demat account or mutual fund folio opened on or after September 1, an investor will have two options:

1. Register one or more nominees.
2. Submit the prescribed declaration to opt out of nomination.

Simply leaving the nomination field blank will no longer be treated as a valid choice.

The rule covers demat accounts used to hold securities and mutual fund folios maintained in a single investor’s name. Trading-account nomination is a separate subject and should not be confused with nomination for the demat account in which securities are held.

The official requirements are contained in SEBI’s May 29, 2026 nomination circular.

Up to Three Nominees May Be Registered

An investor can appoint up to three nominees for each eligible demat account or mutual fund folio.

For example, an investor may nominate a spouse and two children instead of allocating the entire holding to one person. The investor may specify the percentage intended for each nominee.

If multiple nominees are registered without percentage allocations, the assets will generally be divided equally. Where the division of securities leaves an odd lot, the remaining unit or security will be transferred to the first nominee listed in the nomination form, as provided under the framework.

Investors should list nominees carefully and review the order in which their names appear.

Rules for Joint Accounts

Nomination remains optional for jointly held demat accounts and mutual fund folios.

Where joint holders decide to add, modify or cancel a nomination, all joint holders must provide their consent. This applies regardless of whether the account’s operating instruction permits one holder or holder to transact.

Joint holders should also understand what happens after one holder dies. In many jointly held investments, the surviving holder or holders continue to have rights over the account before the nominee’s claim becomes relevant. The exact process depends on the holding structure and applicable rules.

Online and Offline Nomination

SEBI permits nomination through both digital and physical methods.

For an online request, the investor may be authenticated through an approved digital-signature or electronic-signature facility. Two-factor authentication may also be used. An OTP sent to the registered mobile number and email address can form part of the verification process.

For an offline request, the investor can submit a physical form bearing a wet signature. A witness is not ordinarily required when the investor signs the form. If a thumb impression is used, two witnesses may be required.

The depository participant, asset management company or registrar should provide an acknowledgement after a nomination is registered, modified or cancelled. Investors should retain this acknowledgement with their financial records.

Can a Minor Be Nominated?

A minor may be named as a nominee. In such a case, the investor should provide the minor’s date of birth and the details of the guardian who will act while the nominee remains underage.

The guardian does not become the beneficial owner merely because their information appears in the nomination. Their role is connected with representing the minor until the minor becomes legally capable of handling the assets.

Nominee and guardian information should be accurate and kept current. Incorrect contact details can delay communication and claim processing.

Nomination Is Not the Same as Inheritance

This is the most important legal distinction in the nomination process.

A nominee is the person recognized by the depository participant, mutual fund or registrar for receiving the assets after the investor’s death and completing the transmission process. However, the nominee does not automatically become the final beneficial owner in every situation.

The rights of legal heirs may continue to be governed by applicable succession law and a valid will. SEBI’s nomination documentation reflects the legal position that a nominee may receive the assets as a trustee for the lawful heirs.

An investor should therefore not treat nomination as a substitute for estate planning. A nomination will and other succession documents should be reviewed together so that they do not contain conflicting instructions.

Individuals with complex family circumstances, significant assets or competing claims should obtain independent legal advice.

What Happens If an Investor opts Out?

Choosing not to appoint a nominee does not cause the investment to disappear. Legal heirs can still claim the demat securities or mutual fund units after the investor’s death.

The transmission process may, however, require more documents. Depending on the value of the assets and circumstances, heirs may need to provide a death certificate, legal-heir documents, indemnities, affidavits, a succession certificate, probate or other evidence requested under the applicable framework.

This can increase paperwork and delay access. Investors who opt out should understand the possible inconvenience for their families and maintain clear estate records.

Can a Nomination Be Changed?

Yes. An investor can add, change or cancel a nomination during their lifetime. SEBI does not limit the number of times nomination instructions may be updated.

A review may be appropriate after marriage, divorce, the birth of a child, the death of a nominee or another important family event. Changes in a will should also prompt a review of financial nominations.

Updating only one mutual fund folio does not automatically update every other folio or demat account. Investors should examine all accounts separately.

What Should Existing Investors Do?

Existing investors should check whether their accounts already contain valid nomination instructions. They should verify:

• The nominee’s full name
• Relationship with the investor
• Contact and address details
• Percentage allocation
• Date of birth for a minor
• Guardian details where required
• Consistency with the investor’s will

Investors should respond only through their official depository participant, AMC, registrar or verified platform. Nomination reminders can also be exploited by fraudsters. Passwords, PINs and OTPs should never be shared with an unknown caller or through an unverified link.

Final Takeaway

From September 1, 2026, an investor opening a new single-holder demat account or mutual fund folio must make a recorded choice: appoint up to three nominees or formally opt out.

Nomination can simplify transmission, but it does not replace a will or determine inheritance in every case. The best approach is to maintain accurate nominations, preserve acknowledgements, keep family members informed about important accounts and review succession documents periodically.

Disclaimer: This article is for general educational purposes and does not constitute legal, tax or investment advice. Nomination and inheritance rights depend on the account structure, succession law, a valid will and individual circumstances. Investors should check the latest SEBI requirements and consult an appropriately qualified professional where necessary.