The Securities and Exchange Board of India (SEBI) on September 19, 2025, issued the notification regarding the Smooth transmission of securities from Nominee to Legal Heir.
The following has been stated namely: -
• SEBI clarifies that a nominee acts as a trustee, holding securities on behalf of the original holder, and facilitates transfer to the legal heir as per the succession plan—not as a beneficiary owner.
• Currently, such transmissions could mistakenly trigger capital gains tax on the nominee, despite being exempt, causing inconvenience even though refunds can be claimed later.
• Based on consultation with the CBDT, SEBI mandates the use of a standard reason code “TLH” (Transmission to Legal Heirs) by reporting entities when reporting these transactions to ensure correct tax treatment.
• The existing procedural requirements under SEBI (LODR) Regulations, 2015 and the Master Circular for RTAs (dated June 23, 2025) for transmitting securities to legal heirs will continue to apply.
• RTAs, listed issuers, depositories, and depository participants must update their systems and implement the new reporting code "TLH" starting January 01, 2026.
[Notification No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/130]
