Nomination
Also written Nominee · Nomination of demat account
The account holder's written direction naming who receives the securities on death — up to ten nominees for a demat account, with percentages that must total 100, mandatory for single holdings.
In plain language
Nomination decides who the DP may transmit securities to when the holder dies, without the family first having to produce a succession certificate or a probated will.
The Companies Act, 2013 lets a shareholder or debenture holder nominate one person. The depository goes considerably further: an investor holding securities in dematerialised form may nominate up to ten persons, each with a stated percentage share.
Nomination can be made at account opening or at any time afterwards, and changed at will by filing the form again. It is mandatory for a single holding and optional for a jointly held account — though where an account is joint and nomination is made, all the joint holders must sign the form.
How it works
The percentages specified for the nominees must total 100. If the account holder gives no percentages at all, the securities are divided equally.
Distribution happens at ISIN level, in the proportions recorded. Where a quantity does not divide exactly in the stated proportion, the DP splits it as far as it divides and the remaining indivisible securities go to the nominee whose name is recorded first.
Who may and may not nominate is a list worth memorising. Non-individuals cannot — not a society, a trust, a body corporate, a Hindu Undivided Family, nor a holder of power of attorney. A minor may nominate through a guardian, and a minor may be a nominee, represented by a guardian.
The two depositories differ on paperwork: NSDL requires the nominee's photograph and signature, and the guardian's signature where the nominee is a minor. Under CDSL operating instructions none of those is required.
On death, the nominee applies with a death certificate, completes KYC, and — where a pledge is subsisting — obtains a discharge from the creditors. Since SEBI's circular of 10 January 2025, a single-holding investor may also empower one non-minor nominee to operate the account if the investor is physically incapacitated but still has the capacity to contract, specifying either a percentage or an absolute value that may be encashed; any encashment is credited only to the bank account linked to the investor's own account.
A worked example
An investor with a single-holding demat account nominates three people — 50%, 30% and 20% — and dies holding two ISINs.
| ISIN | Quantity | Nominee 1 (50%) | Nominee 2 (30%) | Nominee 3 (20%) |
|---|---|---|---|---|
| Equity A, Rs 1,150 a share | 1,000 | 500 | 300 | 200 |
| Equity B, Rs 480 a share | 101 | 50 | 30 | 20 |
Equity A divides exactly: Rs 5,75,000, Rs 3,45,000 and Rs 2,30,000 of value.
Equity B does not. 50% of 101 is 50.5, 30% is 30.3, 20% is 20.2. The DP allots the whole numbers — 50, 30 and 20, which is 100 shares — and the one remaining share goes to the first-named nominee, who ends with 51.
Had the investor written no percentages, the split would have been equal thirds, and the indivisible remainder would still have gone to the first nominee. Had the investor instead been a Hindu Undivided Family, no nomination could have been made at all, and the family would be back to a succession certificate — or, where the market value in each account is not more than Rs 15 lakh, to the reduced documentation route the workbook allows for transmission without nomination.
Why NISM asks about it
Chapter 6 (Functions of DP — Transmission and Nomination). The examinable numbers are ten nominees, percentages totalling 100, nomination mandatory for single holdings and optional for joint ones, and the indivisible-securities rule. The workbook's own review question asks which Act provides for nomination of shares — the Companies Act, 2013.
Common exam traps
- Ten nominees for a demat account, one under the Companies Act. Both numbers are correct in their own context; the question decides which is being asked.
- Mandatory for single holdings, optional for joint ones — and on a joint account all holders must sign the nomination form.
- Non-individuals cannot nominate, and neither can a POA holder. A minor can nominate only through a guardian.
- Indivisible securities go to the first-named nominee, not to the largest percentage holder.
- If percentages are not specified, the split is equal — not void, and not in favour of the first nominee.
- NSDL wants the nominee's photograph and signature; CDSL does not. The workbook states the difference explicitly.
- A nominee is not automatically the owner in perpetuity — regulated entities must facilitate transfer from the nominee to the legal heirs when either party asks.
Where this is taught
- Series V-D · Chapter 9: Investor Servicesintroduced here
- Series VI · Chapter 6: Functions of DP- Transmission & Nominationintroduced here
- Series X-A · Chapter 17: Operational Aspects of Investment Managementintroduced here
- Series X-B · Chapter 15: Tools for Estate Planningintroduced here
- Series II-B · Chapter 12: Investors in Mutual Fundsintroduced here
Related terms
- Succession certificateA certificate issued by a District Court under the Indian Succession Act, 1925 authorising the legal heirs of someone who died without a Will to collect the deceased's debts and securities.
- TransmissionThe transfer of units to the person entitled on the unitholder's death.
- First holderThe holder whose name creates the investment records and who receives all payouts, tax benefits, tax liability and correspondence, although the names of all joint holders are maintained in the records.
- Incapacitated investor mandateA facility for single-holding investors to empower one non-minor nominee to operate the account during physical incapacity, with encashment credited only to the investor's own linked bank account and no service requests…
- Indivisible securities ruleWhere securities of an ISIN cannot be divided exactly in the nominated proportions, the divisible part is distributed and the remaining indivisible securities go to the nominee whose name is recorded first.
- Ten-nominee ruleInvestors holding securities in dematerialised form may nominate up to 10 persons, specifying percentages totalling 100 — against the Companies Act 2013, which permits only one nominee.
- DepositoryAn institution that holds investors' securities in electronic form and provides the services needed to transact in them — the securities equivalent of a bank holding money rather than cash.
- Change of addressThe investor service request to update the address on a folio — signed by the first named holder, backed by PAN and a fresh address proof, and confirmed to both the old and the new address.
- Folio numberThe unique account number a fund house allots to an investor, under which the registrar holds that investor's units across every scheme of the fund, along with the bank mandate, address and signature.
- FATCA and CRSTwo cross-border tax transparency regimes — one American, one OECD — under which a mutual fund's registrar identifies foreign-taxable investors and reports their accounts to the CBDT for automatic exchange.
- Irrevocable trustA trust whose settlor cannot take the property back, which is why the workbook records that it is protected from the settlor's bankruptcy and usable to secure the interests of dependents.