Ease of Doing Investment - Smooth transmission of securities from Nominee to Legal Heir
Summary
SEBI has streamlined the process for transmitting securities from a nominee to a legal heir by introducing a standard reason code 'TLH' for tax reporting. This measure aims to prevent nominees from facing unnecessary capital gains tax assessments, as such transmissions are exempt under Section 47 of the Income Tax Act, 1961. Reporting entities including RTAs, listed issuers, depositories, and depository participants must implement this change by January 01, 2026.
Text
The nominee acts as a Trustee of the securities of the original security holder and transfers the securities to the legal heir as per succession plan.
Reporting entities should use the reason code “TLH” (i.e. Transmission to Legal Heirs), while reporting such transactions to the CBDT.
A standard reason code viz. “TLH” shall be used by the reporting entities while reporting the transmission of securities from nominee to legal heir, to the CBDT so as to enable proper application of the provisions of the Income Tax Act, 1961.
The procedural requirements for transmission of securities to legal heir shall continue to be as provided under the provisions of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 and Master Circular for Registrars to an Issue and Share Transfer Agents dated June 23, 2025.
RTAs, Listed Issuers, Depositories and Depository Participants are directed to take note of above and make necessary system changes and implement above proposal with effect from January 01, 2026.
This circular is issued in exercise of powers conferred under Section 11(1) of Chapter IV of the Securities and Exchange Board of India Act, 1992, Section 19 of Chapter IV of the Depositories Act, 1996, Regulation 40(1) read with Regulation 101 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993.
Source: SecMarx — Ease of Doing Investment - Smooth transmission of securities from Nominee to Legal Heir. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.