Demat Account Nomination – How to Add a Nominee?

At times, investors get concerned about what would happen to the securities in their demat account if they passed away and is there a procedure they can follow to transfer the stocks to a family member? The answer to that query is “Nominee.” Investors can designate a nominee in their demat account so that in the event of an investor’s untimely death, the nominee will have easy access to the securities held in the investor’s demat account.

In this blog, we will explain how to appoint a nominee for your demat account.

Who is the Nominee?

In a Demat account, the nominee is a person designated by the account holder to inherit the securities in the account in the event of the account holder’s unfortunate death. The nominee facilitates the transfer of the asset without probate or formal succession. Adding a nominee to the demat account is advised because it makes transferring the securities held in the demat account easier. If an account holder passes away, the nominee serves as a custodian with the power to administer the securities kept in the demat account.  

What is Nomination in Demat Account?

The process of appointing a nominee by the Demat account holder is known as nomination. A nominee is a person who would inherit the securities, such as shares, bonds, etc., in the event of the account holder’s death. A nominee must be appointed whenever a demat account is opened. It is necessary for the asset transfer to go smoothly. In the event of the account holder’s untimely death, having a nominee in a demat account prevents the situation of unclaimed assets. 

Importance of Adding a Nominee in Demat Account

The key points signifying the importance of having a nominee in a Demat account are mentioned below-

• Easier Asset Transfer – In the event of the account holder’s untimely death, having a nominee in a demat account enables quick and easier transfer of the assets. 
• Protects against uncertainty – Adding a nominee to the demat account reduces the possibility of a dispute involving the transfer of the account holder’s securities. 
• No Additional Cost – No extra fees are associated with adding a nominee to the demat account. 
• No Freezing of Account – The SEBI has released a circular to freeze the Demat accounts for debits if the nominee is not updated in the Demat account. Appointing a nominee prevents such situations.
• Distribution of Asset – You can designate up to three individuals as nominees, making it simple to divide the asset among family members. 
• Saves Time – Designating a nominee in the demat account relieves the legal heirs of the burden of going through a legal procedure. 
• Peace of Mind – You can feel secure knowing your assets will be passed on to the family member you specified in the nomination.  

How to Add a Nominee to a Demat Account Online?

The steps to add a nominee to a demat account online are as follows-

1. Visiting the Website – Visit the NSDL or CDSL website and select the ‘Nominate Online’ option.

2. Enter the Details – You will be redirected to a new webpage where you will be asked to enter various details, such as your Depository Participant ID, client ID, and PAN card.

3. Authentication – An OTP will be sent to your registered mail ID and mobile number, and you must enter that OTP to complete the authentication process.

4. Nomination – There will be two options available. If you wish to add a nominee, select the ‘I wish to nominate’ option and provide the nominee’s details on the next page. The other option is “Opt out of the Nomination” if you don’t wish to appoint a nominee for your demat account. 

5. Authenticating the Nominee Details – After that, you must authenticate the nominee’s details by clicking on the checkbox.

6. Esign– The last step is to sign the documents, which can be completed through e-sign service providers.

7. Service Provider – You will be redirected to the Protean eGov page, where you must perform an Aadhaar Esign.

8. Submission – The nomination process is completed once you enter the OTP received on your Aadhaar-registered mobile number.

 How to add a Nominee in a Demat Account Offline?

The nominee can be easily added to your demat account through offline mode, the steps of which are as follows-

1. Get the Form – The first step would be getting the nomination registration form. Get the Form No. SH-13 Nomination form from the branch of your depository participant or SEBI website.

2. Details – Fill out the nomination form with details such as the nominee’s name, address, relationship with you, and the percentage of assets that would be transferred to the nominee in the event of the investor’s death. Make sure that the details provided are accurate.

3. Signing the Form – The account holder must sign the nomination form, and if there are two joint holders, then all the account holders must sign it.

4. Submission of Form – The form can be submitted to the nearest branch of your depository participant.

5. Receipt of Acknowledgment – The depository participant issues an acknowledgment slip that must be kept for future reference.

6. Confirmation – Once your form is accepted and processed, the depository participant will update the nominee details in your demat account.

Eligibility Criteria for Nominees

The demat accounts have flexible eligibility criteria for nominees; below mentioned are the key eligibility criteria –

• Individual – Regardless of age, a person can be designated as a nominee in a demat account. However, the guardian must be appointed if the nominee is a minor. 
• Minor – A minor can also be designated as a nominee in a demat account. However, in this scenario, the minor’s guardian will manage the account in the event of the account holder’s death until the minor turns 18. 
• NRI – It is also possible to designate a non-resident Indian as a nominee in a demat account. 
• Legal Entities – Legal entities, such as companies, trusts, or partnership firms, are not allowed to be appointed as nominees.
• Joint Account Holders – If there are two or more joint holders, the nominee can only exercise their entitlement if both joint holders pass away. The demat account will continue to be operated if any of the joint holders are still living.  

How to Update/Change Demat Account Nominee?

The nominee in the Demat account can be updated through both online and offline methods-

Online Mode

1. Visit the Website – Go to the NSDL website and then navigate to the main page. 
2. Selecting the Nomination Option – Choose the online nomination option on the main page. 
3. Enter the Details – You will then be taken to a new page where you will be required to provide several details, including your PAN card and Depository Participant ID. 
4. Authentication – You will receive an OTP on your registered email address and mobile number. Input it to finish the authentication procedure. 
5. Edit or Update Nominee – If you want to change or amend the nominee in the Demat account, enter the new nominee’s information on the following page. 
6. Authenticating the Nominee Details – You can update the nominee’s details by entering the OTP sent to your registered mobile number and email ID.
7. Submission – Enter the OTP received on your Aadhar registered mobile number to submit the form.

Offline Mode 

1. Get the Form – Obtain the nomination form. Form SH-14 is the “Cancellation or Variation of Nomination” form, available on the NSDL or CDSL websites. The form is also available at the nearest branch of your Depository Participants. 
2. Account Details – Complete the form with account details such as the demat account number, the account holder’s name, and other information. 
3. Existing Nominee Details – Input details regarding the nominee’s name, birthdate, relationship to the account holder, contact details, and other information. 
4. In Case of Minor – If the nominee is a minor, the guardian’s name, relationship, and contact information must also be provided. 
5. New Nominee Details – Write the details of the new nominee in the form.
6. Signing the Form – The account holder must sign the nomination form, and if there are two joint holders, all the account holders must sign the form. 
7. Submission of Form – Submit the form at the nearest branch of your depository participant.
8. Receipt of Acknowledgment – The acknowledgment given by the depository participant must be kept for future reference to track the process of change in nomination.
9. Confirmation – Once your form is accepted and processed by the depository participant, you will receive a confirmation mail from their end. 

Last Date to Add Nominee in Demat Account 

The extended deadline announced by the Securities and Exchange Board of India is 30 June 2024. If you do not nominate a person in your demat account or opt out of the nomination, then your demat account will be frozen for debits by the depositary participant.

Conclusion

In conclusion, designating a nominee for your demat account is crucial to ensuring a smooth transfer of securities in the event of the account holder’s untimely death. You can designate up to three nominees if you want to transfer the securities to more than one person. These nominees don’t have to be your blood relatives; you can also designate your friends as nominees.

Frequently Asked Questions (FAQs)