SEBI has revised the nomination rules for demat accounts and mutual fund folios to make the process simpler for investors and reduce the risk of unclaimed financial assets.
The revised framework will come into effect from September 1, 2026. The biggest change is that nomination will become mandatory for new single-holder demat accounts and mutual fund folios, unless the investor clearly chooses to opt out through a declaration form.
This means investors opening a new single-holder demat account or mutual fund folio will have to either add a nominee or formally state that they do not wish to nominate anyone.
What Has Changed?
SEBI has simplified the nomination process instead of making it documentation-heavy. The new rules are aimed at improving investor convenience while also helping families claim investments more smoothly after the investor’s death.
Here are the key changes:
1. Nomination Mandatory for New Single-Holder Accounts
For all single-holder demat accounts and mutual fund folios opened on or after September 1, 2026, investors must provide nomination details.
However, investors who do not want to add a nominee can still opt out by submitting the prescribed declaration form.
So, the investor gets two choices:
- Add a nominee
- Submit an opt-out declaration
This rule applies to new single-holder accounts and folios.
2. Nomination Optional for Joint Accounts
For jointly held demat accounts and mutual fund folios, nomination will remain optional.
If joint holders decide to add, change, or cancel a nominee, consent from all joint holders will be required. This applies irrespective of the mode of operation of the account.
This is important because in joint accounts, operational rights and succession handling can differ from single-holder accounts.
3. Up to Three Nominees Can Be Added
Investors can appoint up to three nominees for a demat account or mutual fund folio.
If the investor mentions percentage shares, the holdings will be divided according to those percentages. If no percentage is mentioned, the holdings will be divided equally among the nominees.
In case any odd-lot holding remains after division, it will go to the first nominee mentioned in the nomination form.
4. Fewer Mandatory Details Required
SEBI has reduced the details that investors must provide while adding a nominee.
The mandatory details are:
- Name of the nominee
- Relationship with the investor
- Date of birth, if the nominee is a minor
Other details such as address, mobile number, email ID, KYC information, and percentage allocation are optional.
This is a major simplification because earlier nomination rules had created practical challenges due to additional documentation and verification requirements.
5. Online and Offline Nomination Allowed
Investors can submit nomination details through both online and offline modes.
For online nomination, authentication can be done through:
- Digital signature
- Aadhaar-based e-sign
- Other recognised electronic signature methods
- Two-factor authentication using OTP sent to the registered mobile number and email ID
For offline nomination, investors can submit a physical form with their signature.
If the investor signs the form normally, witness signatures are not required. Witness details will be needed only if the investor uses a thumb impression instead of a signature.
6. Formal Opt-Out Declaration Introduced
Investors who do not want to nominate anyone will have to submit an opt-out declaration.
This declaration makes it clear that the investor understands the possible consequences of not having a nominee. Without nomination, the transfer of securities or mutual fund units to legal heirs may take longer and may require additional documents.
This is one of the reasons SEBI is encouraging nomination: it helps reduce claim-related delays and lowers the chances of investments becoming unclaimed.
7. Reminders for Investors Without Nomination
Depository participants and mutual fund registrars will have to send reminders twice a year to investors who have neither added a nominee nor opted out.
These reminders will be sent through SMS and email.
This step is useful because many investors delay nomination not because they do not want it, but because they forget to complete it.
Why Has SEBI Revised the Rules?
SEBI’s main objective is to make the nomination process easier and reduce unclaimed investor assets.
Many demat accounts and mutual fund folios remain without clear nomination details. When the investor passes away, families may face delays, paperwork, or legal confusion while trying to claim the assets.
By simplifying the form and reducing mandatory details, SEBI is trying to remove friction from the process.
The revised rules also address operational challenges that brokers, depositories, AMCs, and RTAs had raised under the earlier framework.
Important Legal Point: Nominee Is Not Always the Final Owner
Investors should understand one important point clearly.
A nominee is the person who can claim the securities or mutual fund units after the investor’s death. But nomination does not always mean the nominee becomes the final legal owner of the asset.
The final ownership may still depend on the investor’s will, succession law, and claims of legal heirs.
This distinction matters because many investors assume that adding a nominee is the same as making a will. It is not.
Nomination helps in smoother transmission, but it should ideally be aligned with the investor’s estate planning documents, especially where large investments or multiple family members are involved.
What Should Investors Do Now?
Existing investors should review their demat accounts and mutual fund folios and check whether nomination is already updated.
A simple checklist:
- Check whether your demat account has a nominee
- Check nomination status across mutual fund folios
- Update nominee details if family circumstances have changed
- Mention percentage shares if you have more than one nominee
- Add date of birth if the nominee is a minor
- Keep nomination details aligned with your will or succession plan
- Opt out only if you are sure and understand the implications
Final Takeaway
SEBI’s revised nomination rules are investor-friendly because they make the process simpler while still encouraging investors to protect their financial assets from future claim issues.
From September 1, 2026, new single-holder demat accounts and mutual fund folios will require nomination unless the investor formally opts out.
For investors, the message is simple: nomination is not just a compliance formality. It is a basic financial hygiene step that can save family members from avoidable delays and disputes later.