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While the share market demands constant attention to economic news and regulations, many investors overlook the crucial step of planning for the transfer of their shares upon death. This oversight can significantly complicate the process for their heirs. When a Demat account holder passes away, the securities must undergo a defined transmission process to be moved to the rightful successor—be it a joint holder, a nominee, or a legal heir. In this article, we explain what exactly happens if an account holder dies without appointing a nominee.
Key Takeaways
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Securities are transferred to joint holders, nominees, or legal heirs through a defined transmission process after the account holder’s death.
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Accounts without nominees require additional verification, including wills or succession certificates.
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Required documents vary based on the value of securities and other aspects.
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Transmission timelines depend on document checks and claimant verification.
General Process- A Brief Outlook
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A demat account may be held individually or jointly. When an account holder passes away, the transmission process is triggered to shift the securities to the rightful successor.
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The surviving joint holder or legal heirs must approach the concerned Depository Participant (DP). The DP acts as the intermediary authorised under the Securities and Exchange Board of India framework to verify documents and carry out the transmission procedure.
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Transmission begins once the claimant submits the necessary documents to the DP, including the transmission request form and an official copy of the death certificate.
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If the deceased held any securities in physical form, the claimant must directly contact each issuing company, since physical certificates follow company-specific transfer procedures rather than DP-based processing.
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The duration of transmission varies depending on verification and coordination, and the process may take a few months to be fully completed.
Also Read, How to Open a Demat Account?
Jointly Held Accounts
Upon the submission of a transmission form, securities belonging to the account holder are transferred to the joint owner of the account. Proof of the death of the account holder in the form of a death certificate must also be submitted. In order to receive the shares, the joint holder must open a separate account through a depository participant so that they have an outlet where they can receive and store their transferred shares. Caution must be taken to ensure that the name of the individual is spelled out the same for both accounts.
Account With Nomination
Similar to the process of a joint account, the nominee of an account must file for the transfer of shares by filling out a form mentioning their details and submitting a certified death document of the deceased holder. The form can be found by approaching the pertinent depository participant or downloading it from the depository participant’s website. Once these documents and their contained information are verified, the transmission of shares begins and is sent to the depository participant account of the nominee.
If there are legal claimants on the shares, then it may be difficult for the nominee to receive these shares. It becomes a matter of legal interest and resolution.
Account Without Nomination
When a demat account has no registered nominee, the transmission of securities becomes more detailed and time-consuming. The Depository Participant (DP) must first examine the documents submitted by the deceased holder to identify the rightful legal heir. This verification is necessary because, unlike joint accounts or accounts with a nominee, there is no pre-declared beneficiary.
The DP begins by checking whether the deceased had left a valid will. If a will exists, the instructions outlined in it guide how the securities are to be distributed. However, when multiple individuals are named in the will, deciding each person’s share may require court involvement, especially if disputes arise. A court order helps establish clarity on ownership and ensures that the DP follows a legally recognised decision.
If the deceased did not leave a will, the claimant must obtain a succession certificate from the court. This certificate confirms the legal heir’s right to inherit the securities and is essential for the DP to process the transmission request.
In situations involving multiple heirs, it is often advisable for all parties to mutually decide on the distribution of securities. Once an internal agreement is reached, the heirs must submit their respective affidavits to the court for approval. This helps prevent future disputes and enables smoother completion of the transmission process.
Documentation to be Submitted
The documents that need to be submitted for the transfer of shares to family members vary according to the total amount of the securities at hand.
If the total value of the securities is less than ₹15 lakhs, then the legal heir must submit any (or a few) of the following documents:
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Copy of family settlement deed
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Death certificate of the deceased account holder
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Affidavit
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No objection certificate from every legal heir involved
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Notarised letter of indemnity
If the total value of the securities is more than ₹15 lakhs, then the legal heir must submit any (or a few) of the following documents:
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Copy of the will of the deceased account holder
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Succession certificate
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Letter of administration
Taxes on Transmission of Securities
Taxes do not apply at the time of transmission of securities, since the transfer occurs due to inheritance and not through a sale. However, if the inherited securities are later sold, capital gains tax becomes applicable based on the holding period.
Any dividend earned from these inherited holdings is also taxable according to the individual’s income tax slab.
Timeframe for Transmission
The timeframe for completing the transmission of securities generally depends on how quickly the required documents are verified by the Depository Participant. In most cases, the process takes around two to four weeks. Delays may occur if additional documents are needed or if multiple claimants are involved.
Once verification is completed, the securities are transferred to the beneficiary’s Demat account.
Conclusion
Understanding how securities are transmitted after the death of a Demat account holder helps prevent delays and confusion for the heirs. The transmission process varies depending on whether the account has a nominee, is jointly held, or lacks both, in which case additional legal steps may be required.
Clear documentation, timely submission, and cooperation among legal heirs ensure a smoother transfer. With proper awareness and preparation, handling inherited securities becomes significantly easier and more efficient.
