Nominee process at Zerodha

Overview

Nomination is a legal facility that allows the holder of a financial account to designate one or more individuals who will receive the assets held in that account upon the account holder’s death. At Zerodha, nomination is available for three distinct account types that a client typically holds: the trading account (broker account), the demat account (held with CDSL or NSDL), and mutual fund holdings (managed through Coin). Each of these accounts has its own nomination registration, and a nominee registered for one account does not automatically become the nominee for the others.

SEBI significantly tightened nomination requirements in 2023, mandating that all existing demat and trading account holders either register a nominee or submit an explicit opt-out declaration. This was a response to the large volume of unclaimed securities and dividends accumulated in accounts where the account holder had died without a nomination, leaving families unable to access their assets without protracted legal proceedings.

Regulatory background

SEBI circular SEBI/HO/MIRSD/DOP/P/CIR/2023/10 (and related circulars from CDSL and NSDL) required all existing demat account holders to submit either a nomination form or a declaration opting out of nomination by 30 September 2023. Accounts where neither was done were frozen for debit transactions (i.e., unable to sell securities) from the deadline. The deadline was subsequently extended multiple times, but the direction of regulatory intent was clear: SEBI wants every account to have a declared nomination status.

The SEBI circular introduced several new features to the nomination framework:

• Support for up to three nominees, with percentage allocation of assets between nominees.
• Online nomination via e-signatures (eliminating the need for physical witness signatures in most cases).
• Separate nomination for demat accounts versus trading accounts.
• Mandatory opt-out declaration for those who choose not to nominate.

Nomination for the demat account

The demat account nomination is registered directly with the depository (CDSL or NSDL) through Zerodha’s interface. The nomination details entered through the Zerodha Console platform are transmitted to the depository and recorded in the depository’s records.

A Zerodha client can register up to three nominees for their demat account. For each nominee, the client must provide:

• Full name
• Relationship to the account holder
• Date of birth (and, if the nominee is a minor, guardian details)
• Address
• Percentage of the demat account’s assets to be transferred to this nominee upon death

If multiple nominees are registered, the percentages must sum to 100 per cent. Zerodha’s Console interface enforces this constraint.

The nomination is confirmed via an OTP sent to the client’s registered mobile number and email, ensuring that only the account holder can register or change nominees. An Aadhaar-based eSign may also be used in the digital nomination flow.

Nomination for the trading account

The trading account (Zerodha’s broker account) holds cash balances. Nomination for the trading account is a separate registration managed through Zerodha’s own systems. In the event of the account holder’s death, the trading account balance is transferred to the nominee (or to the estate if no nomination exists) after completion of the required legal and documentation process.

The trading account nomination is linked to the broker-level account rather than the depository and is registered through Console.

Nomination for mutual fund holdings

Mutual fund holdings through Coin have their own nomination structure. For demat-held mutual fund units (the standard mode on Coin), the demat account nomination covers these units as part of the overall demat account. For units held in statement-of-account (SoA) format (less common on Coin but possible for older holdings), the nomination is at the folio level with the AMC and must be registered separately with each AMC.

Zerodha’s recommendation is that clients use the demat holding mode for all Coin investments, which consolidates the nomination into a single demat account registration.

Process for registering a nominee

For existing clients (post-SEBI mandate)

Clients who had not registered a nominee before SEBI’s 2023 circular were required to do so through the Console platform. The process:

1. Log into Console and navigate to the account profile section.
2. Select “Nominee” from the account management options.
3. For the demat account: enter nominee details (name, relationship, date of birth, address, allocation percentage).
4. Confirm via OTP received on the registered mobile number.
5. For the trading account: complete a separate nomination form within Console.

The interface distinguishes between demat account nomination (sent to CDSL or NSDL) and trading account nomination (maintained within Zerodha’s systems).

For new clients

As part of Zerodha’s digital account-opening flow, nomination registration is incorporated into the onboarding process. New clients are required to either register a nominee or submit an explicit opt-out before the account is activated.

Opting out of nomination

A client who does not wish to designate a nominee must submit an explicit opt-out declaration. This declaration acknowledges that in the event of the account holder’s death, the assets will be transferred to the legal heirs of the estate through the legal succession process (probate, letters of administration, or succession certificate, as applicable) rather than through the simpler nomination transfer process.

The opt-out is a positive act – it cannot be achieved simply by not responding. SEBI’s 2023 framework requires that every account has a declared status: either a nominee is named or an opt-out is on record. Accounts with no declared status were subject to debit freezing under the enforcement mechanism.

Minor nominees and guardianship

When the designated nominee is a minor (under 18 years), the nomination form must also specify the name and details of the guardian who will represent the minor’s interests until the minor reaches majority. The guardian is typically a parent or court-appointed guardian. Upon the account holder’s death, assets are transferred to the guardian on behalf of the minor nominee, and the guardian manages these assets until the minor reaches 18 years.

Changing nominees

A nominee registration can be changed at any time during the account holder’s lifetime. The change request is processed through Console, following the same OTP-confirmed flow as the initial registration. The new nomination supersedes the previous one upon confirmation. There is no limit to the number of times a nomination can be changed.

What happens upon death

Upon the death of a Zerodha account holder, the nominee (or legal heir) must initiate a transmission request with Zerodha and with the relevant depository. The required documentation typically includes:

• Death certificate of the account holder.
• Nominee’s identity proof (PAN, Aadhaar).
• Completed transmission request form.
• In some cases, an affidavit or indemnity bond.

Where a valid nomination exists, the transmission is typically processed faster than cases involving legal heirs without a nomination, since the nominee’s entitlement is established by the registered nomination. Where no nomination exists, legal heirs must provide succession documents (probate or succession certificate), which can take months or years through the courts.

References

• SEBI Circular SEBI/HO/MIRSD/DOP/P/CIR/2023/10, “Nomination for trading and demat accounts,” January 2023.
• CDSL Circular on nomination implementation, 2023.
• NSDL Circular on nominee registration, 2023.
• Zerodha Z-Connect Blog, “Why you must register a nominee for your demat account,” Zerodha.com.
• Zerodha Support Documentation, “Nominee registration and transmission,” support.zerodha.com.