The move aims to prevent these transactions from being mistakenly treated as taxable sales in the hands of nominees.
Currently, some transmissions of securities from nominees to legal heirs are recorded as normal sales, resulting in capital gains tax for nominees.
SEBI noted that clause (iii) of Section 47 of the Income Tax Act, 1961, excludes such transmissions from the definition of a “transfer” for tax purposes. It emphasised that nominees act only as trustees for legal heirs, and the securities ultimately belong to the heirs of the original holder.The proposal follows recommendations from a working group of Registrars to an Issue and Share Transfer Agents (RTAs) after consultations with multiple stakeholders. SEBI said the standard code would make reporting more consistent and transparent, enabling proper application of tax provisions.
Procedural requirements for transmitting securities to legal heirs will continue to be governed by the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the Master Circular for RTAs dated June 23, 2025.
Public comments on the draft circular are open until September 2, 2025. If approved, RTAs, listed issuers, depositories, and depository participants will have three months from the issuance of the final circular to implement system changes for adopting the ‘TLH’ code.
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