Most Indian investors think of nomination as a one-time formality done at account opening and never revisited. SEBI’s May 29, 2026 circular changes that.
Circular No. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2026/12676, effective September 1, 2026, introduces a revised and consolidated mutual fund nomination framework for demat accounts and mutual fund folios. It makes nomination mandatory for new single-holder accounts, allows up to three nominees with percentage shares, removes the witness requirement for regular signatures, enables fully digital nomination, and supersedes all earlier SEBI circulars on nomination.
Here are the seven things every investor needs to know, and the action checklist at the end to act on it today.
Mutual Fund Nomination Rules: Why SEBI Revised the Nomination Framework
India’s unclaimed financial assets problem is large and growing. When investors die without registered nominees, their families must go through succession certificates, probate proceedings, and extended legal processes to recover holdings. Many simply do not. The assets sit unclaimed, eventually transferred to IEPF.
The January 2025 circular attempted to fix this by making nomination mandatory. Stakeholder representations identified operational challenges in implementing it, particularly around the proposed limit of ten nominees and the witness requirement for all forms. SEBI issued a fresh consultation paper in March 2026 and finalised the revised framework in the May 29, 2026 circular.
The result is a cleaner, simpler, and more enforceable framework than what existed before.
7 Things Every Investor Should Know: Quick Reference
| # | What Changed | What It Means for You |
| 1 | Nomination becomes mandatory for new single-holder accounts from September 1, 2026 | All single-holder demat accounts and mutual fund folios opened on or after September 1, 2026 must include a nomination. Investors who do not wish to nominate must submit a formal opt-out declaration. Joint accounts remain optional. |
| 2 | You can now nominate up to 3 people, with percentage shares | The new circular allows up to three nominees per account or folio. You can assign a specific percentage share to each. If no percentages are specified, the holding is split equally among all nominees. |
| 3 | No witness signature required for a normal signature | A witness is now required only when the investor uses a thumb impression instead of a regular signature. This removes a common friction point from the nomination process, especially for older investors. |
| 4 | You can nominate online using Aadhaar e-sign or OTP | Nominations can be submitted digitally using a digital signature certificate, Aadhaar-based e-sign, other legally recognised electronic signature methods, or OTP-based two-factor authentication. The entire process can be completed without visiting a branch. |
| 5 | Nominees can continue in the same account or open separate ones | When an investor dies, each nominee can choose to either continue in the same shared account or folio, or open a separate account for their individual portion of the holding. |
| 6 | Regulated entities must send bi-annual reminders to investors without nominations. | Depository participants and mutual fund RTAs must send email and SMS reminders twice a year to investors who have not added nominees. A pop-up must appear on first login each day for those without nominations, explaining the benefits. |
| 7 | Opting out comes with a mandatory warning | Investors who choose to opt out of nomination must acknowledge in their declaration that transmission to heirs may be significantly delayed and that unclaimed assets may eventually be transferred to the Investor Education and Protection Fund (IEPF). |
Mutual Fund Nomination Rules: Complete Before and After
| Aspect | Before | After (September 1, 2026) |
| Number of nominees allowed | 3 (down from a proposed 10 in the Jan 2025 draft) | Operationally manageable while still covering most family situations. |
| Witness requirement | Witness needed for regular signatures | Witness now required only for thumb impressions, not regular signatures. |
| Opt-out consequences disclosure | Not always clearly communicated | Mandatory warning: opting out means delayed transmission and IEPF risk. |
| Online nomination methods | Limited | Aadhaar e-sign, digital signature, OTP-based 2FA all accepted. |
| Mandatory for new accounts | Nomination or opt-out required for new accounts (existing rules varied) | From September 1, 2026: all new single-holder accounts must nominate or formally opt out. |
| Nominee on death | Could only transfer to a single new account | Now can continue in same account or open separate accounts per nominee. |
| Reminders to investors | Not standardised | Bi-annual email/SMS reminders + daily pop-up on first login required. |
| Supersedes old circulars | Multiple overlapping circulars created confusion | This circular supersedes all earlier SEBI nomination circulars. One clean framework. |
Who Is Affected and Who Is Not
Affected: New single-holder accounts from September 1, 2026
Anyone opening a new demat account or mutual fund folio with a single holder from September 1, 2026 onwards must either add a nominee or submit a formal opt-out declaration. This applies to all investing through depository participants, mutual fund AMCs, and RTAs.
Not affected in the same way: Existing accounts
The circular focuses on new accounts from September 1, 2026. Existing account holders are not required to add nominations under this circular, but they are strongly encouraged to do so. Regulated entities must send bi-annual reminders and display daily pop-up messages to existing investors who have not registered nominees.
Not affected: Joint accounts and folios
Nomination remains optional for jointly held demat accounts and mutual fund folios. Any addition or change of nominee in a joint account requires the consent of all joint holders.
The Nominee Limit: Why 3 and Not 10
The January 2025 circular proposed allowing up to ten nominees. SEBI’s own review found that the vast majority of investors nominated only one person, and a very small percentage went beyond two. Ten nominees created operational complexity without meaningful benefit.
The May 2026 circular sets the limit at three, aligning with banking norms. Three nominees cover most family succession scenarios (spouse plus children, or parents plus siblings) without imposing system strain on intermediaries.
What Happens If You Opt Out of Nomination
Opting out is a valid choice under the new framework. But SEBI has made it a genuinely informed choice by requiring the opt-out declaration to include a mandatory acknowledgement of consequences.
Investors who opt out must acknowledge in writing that:
- Transmission of their financial assets to legal heirs after death will require a succession certificate, probate of will, or other formal legal process, which is time-consuming and expensive.
- Assets that remain unclaimed for an extended period may eventually be transferred to the Investor Education and Protection Fund (IEPF), after which recovery becomes significantly more difficult.
This is not a penalty. It is a disclosure requirement. SEBI wants investors to understand what they are choosing before they choose it. The opt-out remains available, but it is no longer a casual decision.
Your Nomination Action Checklist
The circular takes effect September 1, 2026. Do not wait until then to audit your existing accounts.
| Action | How and Why | When |
| Check whether a nomination exists on every account | Log in to your demat account with your depository participant and each mutual fund folio or RTA account. Verify a nomination is registered. If you are unsure, check the account statement (nominee details must now be shown on statements). | Do this week |
| Add or update nominees after any life event | Marriage, divorce, death of an existing nominee, birth of a child: all require a nominee update. Nominations do not auto-update. Use the online OTP or Aadhaar e-sign route for fastest completion. | After any life event |
| Split percentages across multiple nominees intentionally | If you have two or three nominees, assign explicit percentages (e.g. spouse 60%, child 1: 20%, child 2: 20%). If you leave percentages blank, the holding is split equally, which may not reflect your actual intentions. | When adding or updating nominees |
| For minors named as nominees, appoint a guardian | If a nominee is below 18 years of age, you must provide a guardian’s name and details. The guardian manages the assets on behalf of the minor until they reach majority. | When adding minor nominees |
| Keep records of nominees across all accounts in one place | Maintain a single document listing every account, the institution, the registered nominee name, and their share percentage. Store it with your will and tell a trusted family member where to find it. | Review annually |
A Note on Nominations and Wills
A nomination is not a will, and a will does not override a nomination for financial instruments regulated by SEBI. The nominee receives the assets on death and holds them in trust for the legal heirs. A will determines how those assets are ultimately distributed among heirs. Both are important, and they serve different purposes.
If your nominee and your legal heirs are the same person, which is common, the distinction does not matter in practice. If they differ, consult a lawyer to ensure your nomination and will are aligned with your actual intentions.
Final Words: Nomination Is the Cheapest Estate Planning Tool Available
Adding a nominee to every financial account takes less than ten minutes online. Failing to do it can take a family months and significant legal fees to resolve after an investor’s death.
SEBI’s May 2026 circular makes this easier than ever: three nominees with percentage shares, no witness for a regular signature, full digital submission, and clear consequences if you choose to opt out.
Do it today: log in to your demat account and each mutual fund folio, check the nominee status, and update it if needed. An AMFI-registered distributor like VSJ FinMart can help you verify that your nominee registrations are current across all your goal-based SIPs and folios.
Read the original SEBI circular at SEBI India.
Frequently Asked Questions
Q: Is nomination mandatory for existing mutual fund folios and demat accounts?
The September 1, 2026 mandatory requirement applies to new single-holder accounts opened on or after that date. Existing account holders are not required to add nominations under this circular but are strongly encouraged to. Regulated entities must send bi-annual reminders and display daily pop-ups to existing investors without registered nominees until they add one or formally opt out.
Q: How many nominees can I add to a mutual fund folio or demat account?
Up to three nominees per account or folio, effective from September 1, 2026. You can assign specific percentage shares to each nominee. If no percentages are specified, holdings are divided equally. You can also modify, update, or cancel nominations any number of times, and the depository or RTA must acknowledge every change.
Q: Can I nominate a minor as my nominee for a demat account or mutual fund?
Yes, but you must also provide a guardian’s name and details at the time of nomination. The guardian manages the assets on the minor’s behalf until they turn 18. The nominee’s name, relationship to the investor, and date of birth are mandatory fields when the nominee is a minor.
Q: What is the difference between a nominee and a legal heir?
A nominee receives your financial assets immediately upon your death without requiring a court process. They hold those assets in trust for the legal heirs, who are the people entitled to inherit under your will or applicable succession law. A nomination speeds up asset transfer. A will determines how assets are ultimately distributed. Both are important and ideally should be aligned.
Q: Do I need to submit a nomination form offline, or can I do it online?
Both routes are available. Online: digital signature certificate, Aadhaar-based e-sign, or OTP-based two-factor authentication. Offline: a physical form with your regular signature, no witness required. A witness is only required if you use a thumb impression instead of a signature. Contact your depository participant or mutual fund RTA for the specific form and process.
Disclaimer
The information provided in this blog is for educational and informational purposes only and should not be construed as investment advice. Please consult a qualified financial advisor before making any investment decisions. Shashikant Chanderkumar Mudaliar (ARN: 319377), operating under the brand name VSJ FinMart, is an AMFI-registered Mutual Fund Distributor (MFD) and does not provide investment advisory services. Mutual fund investments are subject to market risks. Past performance is not indicative of future results. Please read all scheme-related documents carefully before investing. Registration details can be verified at www.amfiindia.com/locate-distributor.