Markets regulator Sebi on Friday simplified the process of transferring securities from a nominee to the legal heir.
When a nominee transfers securities to a legal heir, the transaction is sometimes treated as a “transfer” and assessed for capital gains tax.
However, under Section 47(iii) of the Income Tax Act, 1961, such a transmission is exempt and should not attract tax. While the nominee can claim a refund later, this causes unnecessary inconvenience.
To resolve this, a working group consulted the Central Board of Direct Taxes (CBDT) and recommended the use of a new reporting code “TLH” (Transmission to Legal Heirs). This code will help ensure such transfers are correctly reported and not taxed as capital gains.
“A standard reason code shall be used by the reporting entities while reporting the transmission of securities from a nominee to a legal heir to the CBDT so as to enable proper application of the provisions of the Income Tax Act, 1961,” Sebi said.
From January 1, 2026, all reporting entities, including RTAs, listed companies, depositories, and depository participants, would use the “TLH” code.
To promote transparency in the Alternative Investment Fund (AIF) ecosystem, Sebi also proposed that AIFs should regularly update the net asset value (NAVs) of their units in the depository system.
The markets regulator has permitted more charitable entities to raise funds through the Social Stock Exchange (SSE), in a bid to broaden access to the platform.
In its latest circular, the regulator has widened the definition of not-for-profit organisations eligible to list on the SSE.