EN
The handing over of shares and securities to legal heir in case of death of the demat account holder is called transmission. The process is based on the presence of a nominee, joint account or single-name account without nomination. Securities, in the majority of cases, have to be transferred to a different account. Prior knowledge of the rules assists families in saving time and conforming to proper formalities.
Key Takeaways
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Securities do not lapse after death. They pass through a formal transmission process based on nomination or joint holding.
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A nominee or joint holder can claim assets with the required documents, like the TRF and death certificate.
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No capital gains tax applies at the transmission stage.
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Clear documentation reduces delays and disputes.
As with any asset class, the question of how securities held in a demat account are transmitted upon the holder's death needs to be addressed. Typically, this involves transferring shares from one demat account to another. There are three common scenarios upon the death of a demat account holder.
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A nominee was appointed prior to demise by the demat account holder.
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The demat account was jointly operated.
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The demat account had a single owner and no nominee was appointed.
Except in the second case, the securities would need to be transmitted to a different account. Therefore, it is important to understand how to transfer shares from one demat account to another in each case.
1. Nominee Exists
When opening a demat account, there is usually an option to appoint a nominee. The nominee is the entity to whom the assets contained in the demat account are transmitted in the event of the death of the demat account holder. However, this transmission is not automatic, and one needs to follow the due process to transfer shares from one demat account to another. To do this, the nominee has to send the following documents to the office of the depository participant (DP)
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Transmission Request Form (TRF): This is a form that contains the details of the deceased client, the nominee, and the assets contained in the demat account that need to be transferred. The form can be downloaded from the website of your depository participant (DP) or the Central Depository (CDSL/NSDL).
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Death Certificate: A copy of the death certificate of the deceased account holder that has been duly notarised or attested by a Gazetted Officer.
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Client Master Report: A client master report, or CMR, is an important KYC document that contains all the details of the client and their demat account. In this case, the CMR of the nominee's own demat account is required to facilitate the credit of shares. The CMR can be downloaded from the website or mobile app of the nominee's DP.
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Self-attested PAN and Aadhaar: The nominee must provide self-attested copies of their identity documents as part of the KYC verification.
2. Joint Demat Account
In case the demat account was a joint account, the surviving account holder succeeds to the ownership of the assets contained in the account based on the principle of survivorship. In this case, the following documents are required:
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Transmission Request Form: This is the same form as required in the previous case. However, in the case of joint accounts, most DPs usually have a separate annexure for the deletion of the deceased holder's name that differs from the annexure required in the case of a nominee. You will need to fill out the correct annexure as provided by your DP.
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Death Certificate: A copy of the death certificate duly notarised or attested by a Gazetted Officer.
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Client Master Report: The CMR of the surviving joint account holders is required for their new or updated demat account.
3. Single Owner and No Nominee Exists
How to transfer shares from one demat to another in case of death when the account was singly operated and no nominee was appointed? This is a more complex case. The requirements depend on the total value of the securities in the account. The threshold is determined by individual depository participants (DPs) as per NSDL/CDSL guidelines and may vary. The following documents must be submitted:
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Transmission Request Form: Just as in the previous two cases, the transmission request form, duly filled out, is needed.
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Death Certificate: A copy of the death certificate duly notarised or attested by a Gazetted Officer.
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In addition, for values below the threshold:
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Letter of Indemnity: A legal declaration executed on non-judicial stamp paper of appropriate value and notarised, indemnifying the DP against any future claims.
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Affidavit: An affidavit on non-judicial stamp paper stating that the applicant is the legal heir of the deceased and the rightful claimant.
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No-Objection Certificate (NOC): Needed if there are multiple legal heirs. It states that other heirs have no objection to the securities being transmitted to the applicant. Alternatively, a Copy of the Family Settlement Deed can be provided.
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In addition, for values above the threshold :
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One of the following is mandatory: A Succession Certificate, a Probated Will, or a Letter of Administration issued by a competent court.
Taxes on Transmission of Securities
Security transmission to a nominee or legal heir in the event of the demat account holder's death is regarded as a transmission and not a sale. Transmission is not subject to capital gains taxes, as is the case in the guidance of the industry. The immediate tax liability is not incurred when shares are transferred out of the account of the deceased holder to the beneficiary.
Tax is, however, charged in case the heir who is subject to tax then sells those securities. Where this occurs, the cost of acquisition will be the original purchase price paid by the deceased holder. The holding period also encompasses the time of holding of the securities by the initial investor. This determines the classification of gains to be long-term or short-term. The transmission of dividends will be taxable in the hands of the legal heir according to the current income tax rules. The right records of the price of purchase and date assist in good recording when selling.
Timeframe for Transmission
The time frame for transmission after the demise of a demat account holder depends on the documents being submitted and verified. In cases where there is a valid nominee, and proper documentation (delivery of documents like a death certificate, etc.) is done, the transmission could be done in a matter of a few working days to a few weeks. In case of absence of a nominee, legal papers are necessary, like a succession certificate; it may take more time. Delays are minimised through timely and correct documentation.
Conclusion
It is important to know how to transfer shares from one demat account to another in case of the demise of the account holder. As seen from the previous sections, the process is much simpler in the case of joint accounts or in cases where the account holder has appointed a nominee. Appointing a nominee gives a clear statement on who is to succeed to the assets contained in the demat account in the event of the death of the account holder. Therefore, it is a good practice to appoint a nominee when opening a demat account to avoid hassles later on.
