SEBI's new nomination rules for demat accounts and mutual funds: what you need to do

From September 1, 2026, SEBI requires every new single-holder demat account and mutual fund folio to carry either a nomination or a signed declaration explicitly opting out. Leaving the field blank — which most investors have done for years — is no longer accepted.

This affects anyone opening a new account. If you have existing accounts opened before September 1, SEBI has been running a separate nomination compliance drive — you may have already received notices from your broker or fund house.

Here's what changed, why it matters, and exactly what you need to do.

Why SEBI made this change

The nomination gap has been a long-standing problem in Indian capital markets. When an investor dies without a nominee on record, their assets get stuck. The legal heir has to go through a succession certificate or probate process — which can take 2–5 years and costs money — before the broker or fund house will transfer the holdings.

SEBI's 2026 circular addresses this by removing the opt-in ambiguity. Instead of nomination being something investors can ignore, it's now a mandatory step at account opening. You either nominate someone or you explicitly declare that you don't want to — no more silent gaps.

What changed from September 1, 2026

For new accounts and folios

Every new single-holder demat account or mutual fund folio opened from September 1, 2026 must:

1. Add a nomination (up to 3 nominees, with percentage splits), or
2. Submit a signed opt-out declaration explicitly declining to nominate

The account or folio cannot be activated without one of these two steps completed.

Simplifications in the new framework

SEBI also streamlined the nomination process itself:

• No witness required: the old nomination form required a witness signature. The new framework removes this requirement for individual investors.
• Standardised forms: SEBI has standardised the nomination form across all brokers and fund houses — the same form, the same fields, everywhere.
• Digital nomination: online nomination via your broker's or AMC's website or app is accepted without physical paperwork.
• Unlimited changes: you can modify, update, or cancel your nomination any number of times. No fee, no limit.
• Up to 3 nominees: you can split the assets across up to 3 individuals with defined percentages. Percentages must add up to 100%.

Joint accounts: unchanged

For jointly held demat accounts or mutual fund folios (2 or 3 holders), nomination remains optional. Adding or changing a nominee in a joint account requires the consent of all holders.

What you need to do

If you're opening a new account after September 1

You can't skip the nomination step. Your broker or fund house will prompt you during the account opening process. Have the following ready for each nominee:

• Full name
• Relationship to you
• Date of birth (for minor nominees)
• PAN or Aadhaar number
• Percentage share (if adding multiple nominees)

If you're deliberately not nominating (perhaps because you have a will that covers all assets), submit the opt-out declaration. Most brokers allow this digitally.

If you have existing accounts

If you have old accounts without nominations, SEBI's broader compliance campaign — running since 2023 — applies. Your broker or AMC may have already flagged this with you.

Check your account status:

• Zerodha: Kite → Profile → Nomination
• Groww: Profile → Nominees
• HDFC Securities / ICICI Direct: Settings → Nomination Details
• Mutual fund folios: log into your AMC's website or use the MF Central portal (mfcentral.com) to check and update across all folios in one place

For mutual funds specifically, MF Central (the industry utility) lets you update nominations across all your AMC folios in a single session.

What happens if you opt out

Opting out is a valid and legitimate choice. You might choose this if:

• You have a valid will that covers all your investments and you trust the probate/succession process
• You prefer not to nominate a specific individual due to family circumstances
• Your assets are small enough that the transmission process isn't a concern

If you opt out and later die without a nominee, your legal heirs will need to go through the standard transmission process — succession certificate, court order, or affidavit depending on the asset value and the institution's policy.

The opt-out declaration doesn't expire. You can convert it to a nomination later if your circumstances change.

Nomination vs. a will: the key difference

A common misconception: nomination is not inheritance. The nominee is a custodian, not an inheritor.

Under Indian law for financial assets:

• The nominee has the right to receive the asset on your death
• The legal heir (determined by your will or succession law) has the right to ultimately own it

In practice: the nominee collects the shares or fund units from the broker/AMC. If the nominee is also the legal heir (e.g., your spouse or child named in the will), there's no conflict. If the nominee is someone other than the legal heir, they're obligated to pass the assets to the actual heir.

For most people — spouse, adult children — nominating the intended heir is the cleanest approach. The nominee receives the assets quickly (no court process), and since they're also the heir, there's no dispute.

For investors with US stocks or RSUs

If you hold US stocks through Indian platforms (Vested, IndMoney, Rovia, NSE IFSC), the nomination rules for those accounts follow the platform's terms. These are typically Indian entities and fall under SEBI's framework.

For directly held US brokerage accounts (E*Trade, Fidelity, IBKR) — these are outside SEBI's jurisdiction. US brokerages have their own beneficiary designation system, which works similarly to Indian nomination. Log into your US brokerage and check the "Transfer on Death" (TOD) or "Beneficiary" section — this is the US equivalent.

For RSUs that haven't vested yet — these are plan-level assets, and the equity plan document (your employer's RSU agreement) determines what happens to unvested RSUs on death. Most plans cancel unvested RSUs on death, though some have provisions for acceleration or pro-rata vesting for the estate. Check your plan document.

The bottom line

SEBI's September 2026 nomination mandate removes a gap that's caused unnecessary hardship for thousands of families. The process is now simpler (no witness needed, digital forms, no limit on changes) and mandatory for new accounts.

Three things to do this week:

1. New accounts: don't skip the nomination step — add a nominee or file the opt-out declaration
2. Old accounts: check your existing demat and MF folios via your broker's app or MF Central; update if blank
3. US brokerage accounts: separately verify your TOD/beneficiary designation on any US platform you use

This takes 10 minutes and prevents your family from spending 2 years in court.