SEBI proposes identifier code for share transmission to ease tax compliance
This story was originally published at 20:52 IST on 12 August 2025
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NEW DELHI – The Securities and Exchange Board of India has proposed the use of an identifier code in the transmission of securities from a nominee to a legal heir so that the process smoothly attracts the capital gains tax exemption under the income-tax law. SEBI issued a consultation paper Tuesday detailing the proposal in a draft circular to be issued to depositories, depository participants, listed issuers, and registrars to an issue and share transfer agents. It has invited comments from the public by Sept. 2.
Under the law, since the nominee is only a trustee, the deceased investor's securities held by a nominee ultimately belong to the legal heirs of the deceased investor. SEBI said that since the current transmission of securities from the nominee to the legal heir "is not properly reported", it "may be considered as normal sale of securities" and attract capital gains tax. This situation can arise, according to SEBI, despite the Income Tax Act, 1961, not considering such transmission as "transfer".
The market regulator said this problem can be eliminated if the transmission is given a code such as "transmission to legal heirs" by entities reporting it to the Central Board of Direct Taxes. In the draft circular, SEBI said the registrars and transfer agents, listed issuers, depositories, and depository participant will have to make necessary system changes for implementation of this change. End
Reported by Rajesh Gajra
Edited by Tanima Banerjee
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