SEBI, through its Circular dated 19th September 2025 (SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/130), has simplified the process of smooth transmission of securities from nominee to legal heir. Currently, nominees transferring securities to legal heirs may face capital gains tax assessments, despite such transmissions being exempt under Section 47(iii) of the Income Tax Act, 1961. Although refunds could be claimed, the process caused unnecessary inconvenience. To address this, SEBI, in consultation with CBDT, has introduced a new reporting mechanism.
Accordingly, a standard reason code “TLH” (Transmission to Legal Heirs) shall be used by RTAs, Depositories, Issuers, and Depository Participants while reporting such transactions to CBDT. This will ensure correct application of tax provisions and prevent inappropriate tax demands. Procedural requirements for transmission will continue as per SEBI LODR Regulations, 2015 and the Master Circular for RTAs. The new framework becomes effective from January 1, 2026, and stakeholders are directed to update systems accordingly. This move enhances investor convenience and aligns regulatory processes with tax provisions.
