SEBI introduces identifier code for share transmission to ease tax compliance
This story was originally published at 18:43 IST on 19 September 2025
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--SEBI directs identifier code for share transmission to ease tax compliance
NEW DELHI - The Securities and Exchange Board of India issued a circular Friday on the use of an identifier code in the transmission of securities from a nominee to a legal heir. The capital market regulator has directed registrars to an issue and share transfer agents, listed companies, depositories, and depository participants to use a new standard reason code 'TLH', short for 'transmission to legal heirs,' while reporting to the Central Board of Direct Taxes the transmission of securities from a nominee to the legal heir.
This, according to SEBI, is needed "so as to enable proper application" of income tax law and rules. SEBI has asked the specified intermediaries and issuers to effect necessary system changes to implement the code addition, and go live with it from Jan. 1.
Under the laws, 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 in the current transmission of securities from the nominee to the legal heir, the nominee may be assessed for capital gains tax, which is not appropriate since the Income Tax Act, 1961, does not consider such transmission as "transfer" and exempts it from capital gains tax. According to SEBI, this problem will be eliminated if the transmission is given a code such as "transmission to legal heirs" that identifies the transfer clearly to the tax authorities and does not attract capital gains tax. End
Reported by Rajesh Gajra
Edited by Tanima Banerjee
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