SEBI lets you name up to 10 nominees on a mutual fund folio: the estate-planning upgrade every SIP investor should action

On 10 January 2025, the Securities and Exchange Board of India issued circular SEBI/HO/OIAE/OIAE_IAD-3/P/ON/2025/01650, revising and revamping nomination facilities across the Indian securities market. The headline change is simple to state and easy to underestimate: you may now register up to 10 nominees on a single mutual fund folio or demat account, each with a specified percentage allocation, up from the earlier practice of three. For the millions of investors who poured a record Rs 29,529 crore into mutual fund systematic investment plans in October 2025 alone, this is the estate-planning upgrade to action this quarter.

Nomination is one of two tools for passing on a mutual fund corpus; a Will is the other. They are not interchangeable, and confusing them is how families end up in transmission disputes years after a death. Below we compare the two head to head, set out the tax treatment (nomination and Wills change custody, not the cost base), and tell you which investor profile should lean on which. Every figure here traces to the SEBI circular of 10 January 2025 or to the Income Tax Act rates in force for FY 2025-26.

Side-by-Side Comparison

A nominee is a custodian, not an owner. SEBI's 10 January 2025 circular is explicit that nomination governs transmission of units to a trustee-like recipient on the death or incapacity of the holder; it does not decide who ultimately inherits under succession law. A Will, by contrast, actually distributes ownership. The two work best in tandem, and the table below sets out where each is strong across seven practical dimensions.

The critical point the SEBI circular of 10 January 2025 stresses is sequencing: units first transmit to the registered nominee within days, and the nominee then holds them subject to the succession claim established by the Will or by personal law. A folio with 10 nominees at defined percentages tells the Asset Management Company exactly how to split units on death, which is why the 2025 rule matters for anyone running a long-horizon systematic investment plan. Without nomination, even a modest folio can be frozen pending a succession certificate, a process that routinely runs past 12 months. A second nuance from the 10 January 2025 circular is worth underlining for anyone who set up folios before 2025: the earlier three-nominee ceiling has been formally lifted, so existing folios can be re-lodged with up to 10 nominees at no cost. SEBI also standardised the documentation for transmission, reducing the paperwork mismatch between AMCs that had frustrated families for years. For an investor holding folios across four or five fund houses, re-registering nominees under the unified 2025 format is a single afternoon's work that removes the largest single cause of post-death transmission delay, which industry data has long put at well over 12 months for un-nominated folios.

Tax Treatment

Here is the reassurance that most investors miss: transmission is not a sale. When units pass to a nominee or a legatee under a Will, there is no capital-gains event on that transfer. The Income Tax Act treats inheritance and transmission on death as exempt under Section 47, so no long-term capital gains tax arises at the moment of transmission in 2026. The tax clock only starts ticking again when the beneficiary eventually redeems.

The genuinely valuable part, confirmed in the SEBI transmission framework, is that transmitted units retain the original holder's cost of acquisition and the original date of acquisition. That preserved holding period is what determines the rate the beneficiary pays on a future redemption. For an equity-oriented fund held (across both hands) for more than 12 months, gains above Rs 1.25 lakh in a financial year are taxed at 12.5 per cent long-term, per the Budget 2024 regime effective 23 July 2024. The table below sets out the rates a beneficiary would face on redemption in FY 2025-26.

Consider a worked example. Suppose a parent began an SIP in an equity fund in March 2018 and built a corpus, and the units transmit to a nominee child in July 2026. Because the March 2018 acquisition date carries over, the child's units are already long-term. If the child redeems Rs 8 lakh of gains, the first Rs 1.25 lakh is exempt and the balance of Rs 6.75 lakh is taxed at 12.5 per cent, a liability of Rs 84,375 plus 4 per cent cess. Had the holding period reset to July 2026, the same redemption inside 12 months would attract 20 per cent short-term tax, or Rs 1.6 lakh, a difference of over Rs 75,000. The preserved base, guaranteed by the transmission rules the 10 January 2025 circular reinforces, is worth real money. You can model the underlying corpus with the Oquilia lumpsum calculator before deciding a redemption schedule.

Who Should Pick Which

The honest answer for almost every investor is both, but the emphasis shifts by profile. Use nomination as the fast-transmission layer and a Will as the ownership-and-fairness layer; the SEBI circular of 10 January 2025 makes the first layer far more expressive than it was before 1 March 2025.

The single unmarried professional running two or three SIPs should, at minimum, register nominees on every folio this month, because it costs nothing at the Registrar and Transfer Agent and prevents a frozen corpus. With up to 10 nominees now permitted, a young investor can name a parent at 60 per cent and two siblings at 20 per cent each without needing a Will yet, though a Will remains advisable once assets exceed a few folios. The married investor with children should nominate the spouse and children with explicit percentages, and additionally write a Will, because personal succession law can otherwise override intentions where nomination and inheritance diverge, a gap Indian courts have repeatedly flagged since the Supreme Court's 2005 ruling in Sarbati Devi.

High-net-worth families holding folios across multiple AMCs gain the most from the 2025 expansion: 10 nominees per folio, each at a defined percentage, lets a multi-generational split be encoded folio by folio, while a registered Will or a private trust handles the estate-level allocation. Investors also holding retirement assets should remember that nomination rules differ by product; the NPS calculator and a PPF projection help you see the full retirement corpus that your estate plan must cover, because EPF, NPS and PPF each carry their own nomination forms distinct from the mutual fund folio. For the broader mechanics of how units accumulate before any of this matters, the glossary entry on rupee cost averaging is a useful primer. Returning NRIs deserve a special note. An investor who built folios while resident and later moved abroad should re-confirm nominees under the 2025 format on repatriation, because a mismatch between the folio's KYC status and the nominee record is a common reason AMCs freeze transmission. The up-to-10-nominee flexibility introduced on 1 March 2025 makes it straightforward to name beneficiaries across two countries with defined percentages, but the nomination is only as good as the KYC that sits behind it.

One caution applies to every profile. The RBI repo rate stood at 5.25 per cent after the Monetary Policy Committee's hold on 8 April 2026, and small-savings rates such as PPF at 7.1 per cent for the July to September 2026 quarter are unchanged, so many investors are steering fresh money toward equity funds where the 12.5 per cent LTCG rate and the transmission mechanics discussed here directly apply. Getting the nomination right today protects a corpus you may not redeem for 20 years.

FAQ

How many nominees can I add to a mutual fund folio in 2026?

Up to 10, following SEBI circular SEBI/HO/OIAE/OIAE_IAD-3/P/ON/2025/01650 dated 10 January 2025, with the rule operative from 1 March 2025. You can assign a specific percentage to each of the 10 nominees, and the allocations must total 100 per cent.

Does adding a nominee change who legally inherits my units?

No. The SEBI circular of 10 January 2025 confirms a nominee is a custodian who receives units on transmission, not the final owner. Ultimate ownership is decided by your Will or by personal succession law, which is why financial planners recommend running both a nomination and a Will in parallel.

Will my family pay capital-gains tax when units transmit to them?

Not at transmission. Transfer of units on death is not treated as a taxable sale under Section 47 of the Income Tax Act, so no LTCG or STCG arises in 2026 at the point of transmission. Tax applies only when the beneficiary later redeems the units.

What holding period and cost does my nominee inherit?

The original ones. Transmitted units keep your acquisition date and your cost of acquisition, so if you have held equity units for more than 12 months, your nominee's eventual redemption is taxed as long-term at 12.5 per cent above the Rs 1.25 lakh annual exemption, per the Budget 2024 regime dated 23 July 2024.

Is nomination mandatory for mutual fund folios?

Investors must either register a nominee or formally opt out through a declaration, per SEBI's nomination framework tightened by the 10 January 2025 circular. Folios that neither nominate nor opt out can face operational restrictions, so completing the nomination this quarter is the safer course.

Can I change my nominees later?

Yes, at any time and free of charge at the AMC or Registrar and Transfer Agent. Because the 10 January 2025 circular allows up to 10 nominees with editable percentage splits, you can rebalance allocations after a marriage, birth or death without redrafting a Will each time.

Does the same 10-nominee rule apply to my demat account?

Yes. The SEBI circular of 10 January 2025 applies the up-to-10-nominees facility across the securities market, covering both mutual fund folios and demat accounts, with the same percentage-allocation and transmission rules effective 1 March 2025.