Transmission of units
Also written Transmission · Transmission of mutual fund units
The transfer of mutual fund units after a unit holder dies — to the surviving joint holder, the registered nominee or a legal heir — with documents that depend on who claims and how much is at stake.
In plain language
A transfer happens because an owner chose to sell or give. A transmission happens because an owner has died. The units have to go somewhere, and the registrar has to be sure it is the right somewhere.
The workbook defines it as the process to transfer mutual fund units in case of the demise of the unit holder. The claimant can be one of three people:
- the surviving unit holder — if the first holder dies, units go to the second holder;
- the nominee registered in the folio;
- the legal heir, where there is only one holder and no nominee.
Which of these applies decides almost everything else: which form is used, how many documents are needed, and whether the person receives the units as owner or as trustee.
How it works
The form tells you the situation:
| Form | Situation |
|---|---|
| T1 | Deleting the name of a deceased 2nd or 3rd holder |
| T2 | Death of the first holder — transmission to surviving holder(s) |
| T3 | Death of sole or all holders — to registered nominee, or to claimant where no nominee |
| T4 | Change of Karta of an HUF on the Karta's death |
| T5 | Death of Karta with no surviving co-parcener, or HUF dissolved |
To a nominee, the list is deliberately short: Form T3, a self-attested death certificate, completed or reaffirmed KYC of the nominee, and discharge from creditors if units are pledged. Regulated entities shall not seek affidavits, indemnities, undertakings, attestations or notarisations from a nominee. The nominee receives the assets as trustee on behalf of the legal heirs.
To a surviving joint holder, under the rule of survivorship, the survivor receives the assets as owner, not as trustee.
To a claimant without a nomination, the paperwork scales with the transmission value at PAN level:
| Value | Key requirements |
|---|---|
| Up to Rs 5 lakh | Bank manager's attestation of signature; proof of relationship; bond of indemnity; individual affidavits; NOC from other legal heirs |
| Above Rs 5 lakh, below Rs 10 lakh | Signature attested by a Notary Public or JMFC; individual affidavits; plus a notarised registered Will with indemnity, or a legal heirship certificate with indemnity and NOCs |
| Above Rs 10 lakh | Probated Will, or Succession Certificate, or Letter of Administration or court decree |
In every case transmission completes only once KYC status is "KYC complied". Moves from nominee to legal heir are reported to CBDT with reason code "TLH", and a lender's rights under a lien supersede those of the joint holder or nominee.
A worked example
Illustrative numbers.
Mr Rao, a sole holder, dies leaving a folio worth Rs 8,40,000. Consider three versions of his paperwork.
Version 1 — he had registered his wife as nominee. Mrs Rao submits Form T3, a self-attested death certificate and her updated KYC. The AMC cannot ask her for an affidavit or an indemnity bond. The units move to her — as trustee for Mr Rao's legal heirs. If his children contest the distribution, that dispute is between them and her, not with the fund.
Version 2 — he held jointly with his wife, with her as second holder. She uses Form T2. Under the rule of survivorship she takes the units as owner, and may keep, change or cancel the old nomination.
Version 3 — sole holding, no nominee. His daughter claims. Rs 8,40,000 is above Rs 5 lakh and below Rs 10 lakh at PAN level, so she needs:
- Form T3 with her signature attested by a Notary Public or JMFC;
- individual affidavits from the legal heirs;
- either a notarised copy of a registered Will with a notarised indemnity bond, or a legal heirship certificate with a notarised indemnity bond and notarised NOCs from the other legal heirs.
Had the folio been worth Rs 12,00,000, none of those alternatives would do: she would need a probated Will, a Succession Certificate, or a Letter of Administration. One nomination form, signed years earlier, is the difference between two documents and a court process.
Why NISM asks about it
Chapter 15 (Non-Financial Transactions) covers transmission in section 15.9 — the three kinds of claimant, the T1 to T5 forms, the document lists for each situation, the Rs 5 lakh and Rs 10 lakh thresholds and the HUF cases — right after section 15.7 on nomination, which supplies the nominee-as-trustee and survivorship rules. A Chapter 15 sample question asks simply what transmission means: transfer of units upon death of a unitholder to a nominee or legal heir, against redemption, sale-and-repurchase and contact-detail distractors.
Common exam traps
- Transmission is not transfer and not redemption. It is triggered by death. The recipient may then redeem or stay invested.
- A nominee receives as trustee for the legal heirs; a surviving joint holder receives as owner.
- No affidavits, indemnities or notarisation may be demanded from a registered nominee. That list applies to claimants without nomination.
- Thresholds are at PAN level: up to Rs 5 lakh, above Rs 5 lakh to Rs 10 lakh, above Rs 10 lakh.
- Death of the first holder goes to the second holder (T2); death of a 2nd or 3rd holder is a name deletion (T1).
- If all joint holders die together with no nominee, assets go to the legal heirs of the youngest joint holder.
- Legal heirs of a nominee who predeceases the investor inherit nothing through that nomination.
- A pledge comes first. Due discharge from the creditor is needed before transmission.
- Nothing completes until KYC is "KYC complied".
Check yourself
1.Transmission of units means:
- a)Transfer of units upon death of a unitholder to a nominee or legal heir
- b)Redemption of units at maturity
- c)Sale and repurchase of units
- d)Change of contact details
Show the answer
Answer: (a) Transfer of units upon death of a unitholder to a nominee or legal heir
Transmission is the process to transfer mutual fund units in case of the demise of the unit holder. The transfer of units can be done to the claimant who can be the surviving unit holder or the nominee registered in the folio or the legal heir.
Death is the trigger — which distinguishes it from every other option.
How it works in practice: if the first holder of the mutual fund units passes away, the units are transmitted to the second holder. In case there is only one holder, the units are transmitted to the nominee/ legal heir.
Option B describes redemption, and Chapter 14 records that in closed-end funds redemption of units happens only on the maturity date of the scheme.
Option C describes ordinary purchase and redemption, or a switch.
Option D is a different non-financial transaction carrying a 15 day turnaround.
Who claims, and how. In case of death of the investor, nominee/claimant is required to complete his/her KYC and submit a request for transmission of units. Once the units are transmitted to the nominee/claimant, he/she may redeem the same or continue the investment.
Redeem or continue — the choice is his, but only after transmission: AMCs should not accept requests for redemption from a claimant pending completion of the transmission of units in his /her favour.
Five forms serve the five situations — T2 to surviving holders, T3 to nominees or claimants, T4 for a new Karta, T5 where the HUF has ended, and T1 to delete a deceased second or third holder.
The tax reporting code: a standard reason code "TLH" (i.e Transmission to legal Heirs) shall be used by the reporting entities while reporting the transmission of securities from nominee to legal heirs, to the CBDT.
Expected turnaround: 21 days.
2.What is the key role of RTAs in non-financial transactions?
- a)Processing investor service requests such as address, email or contact detail changes
- b)Directly managing the AMC's portfolios
- c)Distributing dividends
- d)Managing bank reconciliations
Show the answer
Answer: (a) Processing investor service requests such as address, email or contact detail changes
The registrar and transfer agent (RTA) capture the contact address, bank account details, status, plan or option chosen and all other relevant information. The R&T agent links the information given in the application to the folio allotted to the investor.
The RTA maintains the investor record, so it processes every request to change it.
Option B belongs to the AMC's investment team. Chapter 9 describes the AMC as the entity that manages the fund's investments; an RTA has no portfolio role.
Option C describes a financial transaction, and although the RTA participates — Chapter 14 records that for redemptions and dividend (IDCW) pay-outs, RTA ensures that the payee details are captured properly in the system — that is not a non-financial function.
Option D is a banking function. Chapter 13 gives the RTA a reconciliation role, but again on the financial side, flagging mismatches as NIGO.
What the non-financial work actually comprises, across this chapter: change of name, address, bank details and contact details; PAN updation; minor becoming major; registering and cancelling a PoA; registering and changing a nominee; pledge and lien marking; transmission of units; change of IDCW option; and for institutions, changes of corporate name, status and authorised signatories.
With defined timelines — name 30, signature 30, nomination 30, contact details 15, bank account details 15, PAN 15, transmission 21, and grievance redressal 21.
And beyond processing, the RTA informs. Its value added services include the consolidated account statement, statements of realized and unrealized capital gains, the ELSS statement, the Statement of Grandfathered Equity Schemes carrying NAV as on January 31, 2018, and a Holding and Portfolio Valuation Statement.
3.The first holder of a joint folio, Venkat Rao, dies. The surviving joint holders ask for the units to be transmitted to them. Which request form do they submit?
- a)Form T1
- b)Form T3
- c)Form T4
- d)Form T2
Show the answer
Answer: (d) Form T2
The workbook: "Transmission to surviving unit holders in case of death of the 1st holder: a. Transmission Request Form (Form T2) for transmission of units to the surviving unitholder(s)."
The transmission forms at a glance:
Form Used for T1 Deletion of names of deceased 2nd and/or 3rd holder T2 Transmission to surviving holders on death of the 1st holder T3 Transmission to a registered nominee, or to a claimant where no nominee is registered, on death of sole or all holders T4 Change of Karta on the death of the registered Karta of an HUF T5 Transmission to the claimant on death of the Karta where there is no surviving co-parcener or the HUF has been dissolved/partitioned Option A (T1) is for a 2nd or 3rd holder's death — "Request Form (Form T1) from surviving unitholder(s) requesting for Deletion of Name of Deceased 2nd and/or 3rd Holder." Here it is the first holder who died.
Option B (T3) applies on the death of the sole or all holders.
Option C (T4) applies only to an HUF's Karta.
Other T2 requirements: the death certificate (original, or notarised/attested photocopy), PAN and KYC of the surviving holders if not already provided, a cancelled cheque or recent statement of the new first holder, and FATCA & CRS details. "Transmission will be completed only once the status of the KYC is "KYC complied"."
Where this is taught
Free preparation for NISM Series II-BRelated terms
- 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.
- NominationThe 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.
- NomineeThe person you name to receive custody of your money or securities when you die — a custodian who must pass the asset to the legal heirs, not the owner of it.
- 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.
- Know Your CustomerThe identity and address check every investor must clear before a bank, broker or depository participant will open an account — mandatory under the Prevention of Money Laundering Act, 2002.
- PledgeA charge created over demat securities in favour of a lender who may appropriate them unilaterally on default — created by book entry under section 12 of the Depositories Act, not by handing over anything.
- DigiLockerSEBI's digital-locker push to cut unclaimed mutual fund assets — storing account statements so a registered nominee gets an alert on the investor's demise, without replacing the folio's own nominee.
- Non-financial transactionsA request that changes a mutual fund folio's records — address, bank details, nominee, name — without moving any money or touching the NAV, processed by the RTA on its own SEBI-mandated timetable.
- Registrar and Transfer AgentThe SEBI-registered agency that keeps the investor records of a mutual fund — processing purchases and redemptions, updating folios and unit capital, and issuing account statements.
- Statement of Additional InformationThe scheme related document carrying statutory information about the mutual fund or AMC offering a scheme — one SAI for all the fund's schemes, updated every year and legally part of the SID.
- AMFIThe Association of Mutual Funds in India — the association of all registered AMCs, which registers distributors through the ARN and sets codes of conduct, but is neither a regulator nor a self-regulatory organisation.
- MITRAMutual Fund Investment Tracing and Retrieval Assistant — an industry-level platform built by the RTAs and hosted by CAMS and KFintech to help investors find inactive and unclaimed mutual fund folios.
- Unclaimed amountsDividend and redemption money a mutual fund investor never collected, held in a separate liquid plan — paid at prevailing NAV if claimed within 3 years, at the 3-year NAV if claimed later.