New Delhi, Sep 19 In a move aimed at reducing confusion and easing compliance, capital markets regulator SEBI on Friday simplified the process of transferring securities from nominees to legal heirs.
In a circular issued, the regulator said that from January 1, 2026, all reporting entities, including depositories, listed companies, RTAs and depository participants, will be required to use a new code “TLH” (Transmission to Legal Heirs) while reporting such transfers to the Central Board of Direct Taxes (CBDT).
Currently, when securities are passed on from a nominee to a legal heir, the transaction is sometimes treated as a taxable “transfer” and assessed under capital gains provisions.
Although Section 47(iii) of the Income Tax Act exempts such transmissions, the error often forces investors to seek refunds later, causing unnecessary inconvenience.
To address this issue, SEBI had set up a working group that consulted with CBDT and recommended the adoption of a standard reporting code.
“It has been decided that 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,” SEBI said in its circular.
The regulator has in recent months taken several steps to streamline processes related to nomination and transmission of securities.
Earlier, SEBI had simplified the appointment of nominees to ensure smooth transfer of securities after the death of an investor.
Nominees act as trustees and are required to pass on the securities to the rightful legal heir as per the succession plan.
The new measure, according to SEBI, will help avoid unnecessary tax complications, provide clarity to investors and bring uniformity in reporting by market participants.
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