Nomination in Demat Account: SEBI’s 3-Nominee Rule and How to Add One

Most of us opened a demat account in a hurry. KYC, bank proof, a selfie, done. The nominee field was one more box on a long form, and plenty of people skipped it. That small skip is what nomination in demat account rules are trying to fix, because the cost of a blank nominee field is not paid by the investor. It is paid by the family, later, at the worst possible time.

SEBI has reworked these rules more than once since early 2025. A January 2025 circular allowed up to ten nominees and asked for a lot of detail about each. Then a May 29, 2026 circular replaced it with a simpler system that took effect on September 1, 2026. If you last read about nomination in 2025, some of what you remember no longer applies. Here is what the current rules say, how the split between nominees actually works, and what to do if you want to add or change one.

What nomination in a demat account actually does

A nominee is the person (or people) your depository participant, the broker or bank that holds your demat account, will transfer your securities to after your death. The same idea applies to mutual fund folios, where the AMC and its registrar handle it. With a nominee on record, the DP knows exactly whom to deal with. Without one, the family has to prove who the legal heirs are, which, as SEBI’s own form puts it, can mean additional legal or court-issued documents before a single share moves.

SEBI’s own opt-out declaration says this plainly. Anyone choosing not to nominate has to sign that they understand three things: nomination helps “quickly identify the person for transfer of securities”, without it legal heirs “may require the submission of certain additional legal or court-issued documents”, and holdings that go unclaimed for a long time may end up with the Investor Education and Protection Fund Authority. That wording comes straight from Annexure-B of the SEBI circular dated May 29, 2026.

The IEPF route is not a theoretical risk. We have covered how slow it is to get shares back once they land there in our guide to claiming unclaimed shares from IEPF. A two-minute nomination is far easier than that process.

A blank nominee field costs the investor nothing. It costs the family weeks of paperwork, at exactly the moment they have the least energy for it.

The current rules, effective September 1, 2026

The May 2026 circular, titled “Ease of doing investments – Modified Norms for Nomination in Demat Accounts and Mutual Fund Folios”, says SEBI received representations about “operational challenges” in implementing the January 2025 framework and decided to ease it. The main points:

• Nomination is the default for new single-holder accounts. For every single account or folio opened on or after the implementation date, the investor must give a nomination unless they submit an opt-out declaration.
• Joint accounts stay optional. Nomination is optional for jointly held demat accounts and folios.
• All joint holders must agree. Adding or changing a nominee on a joint account needs the consent of every joint holder, whatever the account’s mode of operation.
• Up to 3 nominees. This replaces the earlier limit of 10.
• Nominees choose how to hold. With multiple nominees, after the investor’s death they can either continue in the same account or folio, or open separate ones for their respective share.
• Change it as often as you like. Investors can provide, change or cancel a nomination any number of times, and the DP or registrar must acknowledge each change.
• It covers old accounts too. The circular says its clauses apply mutatis mutandis to existing accounts and folios.

The circular also says it supersedes all earlier SEBI circulars on nomination for demat accounts and mutual fund folios, and lists eighteen of them going back to 2002, including the January 10, 2025 circular.

What the form asks for now

This is where the 2026 rules got noticeably lighter. Under the January 2025 circular, investors had to give at least one personal identifier for each nominee, such as PAN, driving licence number or the last four digits of Aadhaar. The new form splits the fields into two groups.

Mandatory: the nominee’s name and their relationship with you. Date of birth is mandatory only if the nominee is a minor.

Optional: the nominee’s mobile number and email, the percentage share for each nominee, a KYC detail or identifier (Aadhaar last four digits, PAN, driving licence or passport), and guardian details if a nominee is a minor.

Optional does not mean useless. The form itself notes that the DP or mutual fund registrar can reach your nominee only if you give contact details. Think about it from the family’s side. A DP that holds a phone number can call your nominee. A DP that holds only a name has to wait for someone to walk in.

You also choose what shows up on your holding statements: either the nominee’s name, or just a Yes/No on whether a nomination exists. Some people prefer the second option for privacy. Either way, the statement tells you at a glance whether a nomination is on record, which is worth checking the next time your DP sends one.

How the split between nominees works: a worked example

The arithmetic is simple, but one rule catches people off guard. Here are two hypothetical cases.

Case 1: three nominees, no percentages. Meera holds 100 shares of a hypothetical company, ABC Ltd, and names her husband, son and daughter as nominees without filling in percentages. The circular says that when shares are not specified, the assets are apportioned equally, and “any odd lot after division shall be transferred to the first nominee mentioned in the form”.

One share is small change. But run the same logic on a holding of 1,000 shares of each of five different stocks and the first nominee gets an extra share in every one of them. The order of names on the form matters more than it looks.

Case 2: three nominees with percentages. Suppose Meera instead fills in 50%, 30% and 20% for 250 shares of ABC Ltd. The split is 125, 75 and 50 shares. Clean numbers, no odd lot, and no room for argument later about what she intended.

If you have a view on how your shares should be divided, write the percentages down. Equal split plus the first-nominee rule is a default, not a plan.

How to add or change a nominee in your demat account

Every DP runs its own app and website, so the screens differ. What SEBI fixes is how the request must be validated.

Online: the DP must validate the nomination through a Digital Signature Certificate, Aadhaar-based e-sign (or another e-sign recognised under the Information Technology Act, 2000), or two-factor authentication where one factor is an OTP sent to your registered mobile number and email address. In practice, look for a nomination or nominee section in your broker’s profile or account settings, fill the form and complete the OTP or e-sign step.

Offline: sign the physical form with a wet signature. No witness is needed. If you use a thumb impression instead of a signature, two witnesses must sign and their names and addresses go on the form.

A practical checklist before you submit:

1. Check your current status on your latest holding statement or in the app. You may already have a nominee from account opening that you have forgotten about.
2. Decide on up to three people and the order you list them in.
3. Decide whether you want percentages. If you leave them blank, the equal split and odd-lot rule apply.
4. Add nominees’ mobile numbers and emails, even though they are optional.
5. For a minor nominee, include the date of birth, which is mandatory, and guardian details.
6. For a joint account, get every holder to sign or authenticate.
7. Keep the acknowledgement. The DP is required to give one for every nomination or change.
8. Repeat for each mutual fund folio held outside your demat account, since folios are handled by the AMC’s registrar.

Nomination is recorded account by account and folio by folio. If you have demat accounts with two brokers, check both.

Opting out, and the nudges that follow

You are allowed to say no. You can fill the opt-out declaration on paper or tick the opt-out option online, where the DP must show you the declaration text and you have to agree to it before moving ahead.

Opting out does not end the conversation, though. For accounts and folios without a nomination, including opt-outs, DPs and mutual fund registrars must send messages twice a year by email and SMS nudging you to nominate. They must also show a pop-up on the benefits of nomination the first time you log in each day. Those messages stop once you give a nomination. For many people, that daily pop-up will be the most persuasive part of the whole circular.

Joint holders, nominees and legal heirs are not the same thing

This is where most confusion sits, so it is worth being precise.

Joint holders: the January 2025 circular restated the rule of survivorship. When one joint holder dies, the assets pass to the surviving holder or holders by deleting the deceased’s name, and the survivors receive them as owners, not trustees. That is why many families with joint accounts never think about nominees until both holders are gone.

Nominees: the same January 2025 circular said a nominee receives the assets of a deceased sole holder “as trustee on behalf of legal heir(s)”, and the nominee had to declare that they would cooperate in passing the assets to the legal heirs. The May 2026 circular, which replaced it, focuses on the form and process and does not repeat that language.

What we take from this is simple. A nomination makes the transfer smooth. It is not a substitute for a will. If you want your shares to end up with someone who is not your natural legal heir, or your family situation is complicated, speak to a lawyer and write a will alongside the nomination. Our explainer on transmission of shares walks through what the family actually files after a death.

What changed between 2025 and 2026, side by side

The direction is clear. SEBI cut down what it asks for, so that filling the form is quick enough that people actually do it. Single-holder accounts still need a nomination or a signed opt-out, as they did under the 2025 rules.

Five minutes worth spending this weekend

Open your broker app, find your nomination status, and check it against what you actually want. If it is blank, fix it. If it lists someone who should no longer be there, change it; there is no limit on how many times you can. Then do the same for any mutual fund folios held outside demat.

It is also worth telling your nominees that they are nominees, and where your accounts are. A nominee who does not know the account exists cannot claim it. If an account is ever restricted for KYC or other reasons, our piece on demat account freezes covers how those get lifted, but none of that helps a family that does not know where to look.

Disclaimer: This article is for educational purposes only and is not investment, legal or tax advice. ABC Ltd and the investor in the examples are hypothetical. Rules summarised here are taken from SEBI circulars and may change; check the latest circular and your depository participant’s process, and consult a qualified professional for estate planning.