SEBI’s New Nomination Rules for Demat & Mutual Funds 2025
New Nomination Rules for Demat & Mutual Funds by SEBI allow up to 10 nominees from Sept 2025. Know key changes, forms, deadlines, and investor guidelines.
Investing is not just about growing wealth; it’s also about ensuring it passes smoothly to your loved ones after your lifetime. That’s where nomination comes in.
To simplify and safeguard the nomination process, SEBI has issued a new circular (dated February 16, 2025), with additional operational guidelines shared by KFintech. These new rules are crucial for all mutual fund and demat account holders, and certain changes will take effect from June 1, 2025, and September 1, 2025.
Let’s break this down in simple language with real-life examples.
SEBI’s New Nomination Rules for Demat & Mutual Funds 2025
What Is Nomination and Why Is It Important?
A nomination is a facility that allows you (the investor) to name someone who can claim your investments after your death. Without a nomination, your family may have to go through time-consuming legal procedures.
Example:
Mr. Ramesh, a salaried professional, invested in mutual funds but didn’t nominate anyone. When he passed away unexpectedly, his wife struggled for months to get access to the funds. If Ramesh had nominated her, the process would’ve been much smoother.
What SEBI’s February 2025 Circular Says
No More Freeze for Not Nominating
Earlier, investors had a deadline to either nominate someone or opt-out, failing which their accounts could be frozen. That’s now gone. You can continue investing without fear of your account being frozen.
However, SEBI still advises you to nominate or explicitly opt out for your family’s protection.
What’s Changing from June 1 and September 1, 2025?
KFintech has issued key updates to the nomination process, especially for mutual fund folios. Here’s what’s new:
1. New Nomination Form Format – Effective June 1, 2025
Starting June 1, 2025, a new format of the nomination form must be used. If you’re submitting your nomination on or after June 1, make sure to use the updated form. The opt-out form remains the same. No changes there.
2. Number of Nominees You Can Add
| Period | Max Nominees Allowed |
|---|---|
| Until August 31, 2025 | Up to 3 nominees |
| From September 1, 2025 | Up to 10 nominees |
What this means:
If you’ve been restricted to adding just 3 nominees, you’ll be happy to know that from September 1, you can nominate up to 10 individuals, giving you more flexibility to distribute your investments.
3. Mandatory Information for Each Nominee
To avoid processing delays or rejections (called NIGO – Not in Good Order), the following details are mandatory for each nominee:
- Full Name
- Relationship with the investor
- Percentage of share
- Address
- Email ID
- Mobile number
- Any one of the following identity details:
- PAN
- Driving License Number
- Last 4 digits of Aadhaar
- Passport Number
If any of this is missing, your nomination will be rejected.
4. Date of Birth for Minor Nominees
If you’re nominating a minor, you must mention the Date of Birth (DOB) of the nominee. However, naming a guardian is optional, though it’s recommended for better clarity.
Example:
Mrs. Seema nominates her 10-year-old son as one of the nominees. She must mention his date of birth, but she may choose whether or not to mention her brother as the guardian.
5. Witnesses for Thumb Impressions
If you sign the nomination form using a thumb impression (instead of a signature), you must include the:
- Name, address, and signatures of two witnesses
This is done to ensure the legitimacy of the nomination.
6. Who Can Operate Your Account If You’re Incapacitated?
You can authorize any one of your registered nominees (except a minor) to operate your folio or demat account in case you become physically or mentally incapacitated.
You can give this mandate at any time, and it’s not restricted to just when you open your account.
This is a great new feature that helps in unfortunate medical conditions.
7. Mode of Signing the Nomination Form – Based on Holding Type
| Mode of Holding | Who Can Sign the Form |
|---|---|
| Single / First Holder | Only first holder must sign |
| Joint Holding | All holders must sign |
| Either or Survivor / Anyone or Survivor | Any one holder can sign |
Ensure your signature matches with your records, or else it may be rejected.
8. What Happens After the Investor’s Death?
If the investor passes away:
- The nominees can either:
- Continue as joint holders among themselves, OR
- Open separate single folios/accounts in their own name.
- If some nominees don’t claim their share, the unclaimed portion stays with:
- AMC in case of mutual funds
- Depository in case of demat accounts
9. No Limit on Nomination Updates
There’s no restriction on how many times you can add/change/remove nominees. You can update nominations as often as you want, and every time you do, the AMC or DP will give you an acknowledgment.
Real-Life Example to Understand Better
Case 1:
Mr. Arvind holds a mutual fund folio in his name and wants to nominate his wife and two children equally. He submits the nomination in July 2025 using the new format, filling all mandatory details, including Aadhaar numbers.
Outcome:
Nomination accepted and acknowledged. Upon his death, the fund house can quickly release the funds to the three nominees.
Case 2:
Ms. Rekha submits a nomination form in September 2025 with 8 nominees, but misses entering the mobile number of two nominees.
Outcome:
The nomination is marked as NIGO and rejected until full details are provided.
Why You Should Act Now
- Avoid Legal Complications: Without nomination, your family may need to get legal heir certificates or go to court.
- Peace of Mind: You know your investments are protected and will go to the right person.
- Flexibility: You can nominate, update, or delete nominees anytime.
Summary Table
| Feature | Details |
|---|---|
| New Nomination Format | From June 1, 2025 |
| Max Nominees Allowed | 3 (till Aug 31), 10 (from Sept 1) |
| Mandatory Nominee Info | Name, % share, contact, identity number |
| Minor Nominee | DOB mandatory, guardian optional |
| Incapacitation Mandate | Can authorize any major nominee |
| Signing Rules | Based on folio holding (Single, Joint, Either) |
| Witnesses | Needed for thumb impressions |
| Update Nomination | Unlimited times, with acknowledgment |