Key takeaways
- New nomination rules for mutual fund folios and demat accounts apply from 1 September 2026, under SEBI’s circular dated 29 May 2026.
- Every new single-holder folio must have a nominee unless you sign an opt-out declaration. For joint folios, nomination stays optional.
- You can name up to three nominees and change them as often as you like.
- No witness is needed when you sign the form, except if you use a thumb impression.
- A nominee does not automatically become the owner. Your legal heirs still inherit, so a nomination works best alongside a will.
Every year, money in mutual funds goes unclaimed because an investor passed away without naming a nominee. Families then face months of paperwork to prove their right to the units. SEBI’s new nomination rules, effective 1 September 2026, aim to fix this by making nomination the default and the process much simpler. Here is what changed and what you should do about it.
What are the new mutual fund nomination rules?
The new mutual fund nomination rules come from SEBI’s circular dated 29 May 2026 and apply from 1 September 2026. They make nomination the default for new single-holder folios, allow up to three nominees, remove the witness requirement for signed forms, and make most nominee details optional. They replace SEBI’s earlier nomination circulars, including the one issued in January 2025.
The same rules apply to demat accounts, so if you hold shares or ETFs as well as mutual funds, everything in this guide applies there too.
Is nomination mandatory for mutual funds now?
For new single-holder folios opened on or after 1 September 2026, yes. You must either name a nominee or submit a formal declaration opting out of nomination. For jointly held folios, nomination remains optional.
Two points are worth knowing about joint folios:
- If joint holders do choose to add or change a nominee, all joint holders must consent, whatever the mode of holding.
- In a joint folio, the surviving holder usually continues the investment, so many joint investors still add a nominee to cover the case where all holders pass away.
How many nominees can you add?
You can add up to three nominees per folio and specify what percentage each one receives. If you do not specify shares, the units are divided equally among the nominees, with any indivisible remainder going to the first nominee named. You can add, change or cancel nominees any number of times.
This is a change from the January 2025 framework, which allowed up to ten nominees. Three is enough for most families, and it keeps claims simpler.
What details do you need to give for a nominee?
Only three details are now mandatory. Everything else is optional, which makes nomination much quicker than before.
| Detail | Mandatory or optional |
|---|---|
| Nominee’s name | Mandatory |
| Relationship with the investor | Mandatory |
| Date of birth (only if the nominee is a minor) | Mandatory |
| Percentage share for each nominee | Optional (equal split if not given) |
| Nominee’s KYC identifier (PAN, Aadhaar, etc.) | Optional |
| Guardian’s KYC details (for a minor nominee) | Optional |
| Nominee’s contact details | Optional |
Optional does not mean unimportant. Adding a nominee’s PAN and phone number makes it easier for the fund house to verify and reach them at the time of a claim.
Do you still need a witness to nominate?
No, not if you sign the form. Under the new rules, a witness is needed only when the investor uses a thumb impression instead of a signature. Online nominations can be authenticated with an Aadhaar-based e-signature, a digital signature certificate, or two-factor authentication using a one-time password (OTP).
What changed compared with the earlier rules?
| Point | Earlier framework | From 1 September 2026 |
|---|---|---|
| New single-holder folio | Choice of nomination required | Nomination by default, or a formal opt-out declaration |
| Maximum nominees | Up to 10 | Up to 3 |
| Witness for signed physical form | Required | Not required (only for thumb impression) |
| Nominee KYC details | Required | Optional |
| Changes to nomination | Allowed | Allowed any number of times, with acknowledgement each time |
| Reminders if no nominee | — | Twice a year by SMS/email, plus pop-ups on login |
What if you already have mutual funds without a nominee?
Your existing investments are not frozen, and you can keep investing. But if a folio has no nominee, the fund house or registrar will now remind you twice a year by SMS or email, and you may see pop-up reminders when you log in, until you register a nominee. Your account statement will also show either your nominees’ names or a simple Yes/No for nomination, depending on your choice.
Folios opened years ago are the ones most likely to be missing a nominee, especially those started before nomination became part of standard onboarding. Check every folio, not just the latest one.
Does the nominee become the owner of your mutual funds?
No. In its judgment of 14 December 2023 in Shakti Yezdani v. Jayanand Jayant Salgaonkar, the Supreme Court held that a nominee of shares or mutual fund units does not become the absolute owner. The nominee receives the units and holds them in trust for the legal heirs, who inherit according to succession law or a valid will.
In practice, nomination makes the transfer fast, and a will decides who finally owns the money. If you want a particular person to inherit your investments, name them as nominee and also say so in your will.
How to add or update a nominee in your mutual funds
- List all your folios. A consolidated account statement (CAS) shows every folio under your PAN across fund houses.
- Check the nomination status of each folio on your account statement or the fund house’s website.
- Decide on your nominees and the share each should receive. Keep their name, relationship and, for a minor, date of birth ready.
- Submit the nomination online through the fund house or registrar (such as CAMS or KFintech), authenticating with OTP or Aadhaar e-sign, or through your distributor.
- Keep the acknowledgement. Every nomination, change or cancellation must now be acknowledged.
- Tell your nominees. A nominee who does not know about the investment cannot claim it.
Common nomination mistakes to avoid
- Nominating only some folios. Each folio needs its own nomination.
- Opting out without thinking. An opt-out declaration is a valid choice, but it means your family will need legal documents to claim the units.
- Never updating nominees. Review nominations after marriage, divorce, the birth of a child or a death in the family.
- Relying on nomination instead of a will. Nomination speeds up the transfer; a will decides ownership.
Frequently asked questions
From when do the new mutual fund nomination rules apply?
The new rules apply from 1 September 2026. They were issued through SEBI’s circular dated 29 May 2026 and cover both mutual fund folios and demat accounts.
Is it compulsory to add a nominee in a mutual fund?
For a new single-holder folio opened on or after 1 September 2026, you must either add a nominee or submit a formal opt-out declaration. For jointly held folios, nomination is optional.
Can I add more than one nominee to a mutual fund folio?
Yes. You can add up to three nominees and specify each one’s percentage share. If you do not specify shares, the units are split equally among them.
Do I need a witness to add a nominee?
No, if you sign the nomination form. A witness is required only when you use a thumb impression. Online nominations are authenticated through OTP, Aadhaar e-sign or a digital signature.
Will my mutual fund folio be frozen if I have not added a nominee?
No. Existing folios without a nominee are not frozen. You will, however, receive reminders twice a year until you add a nominee or confirm that you do not want to.
Does a nominee get full ownership of mutual fund units?
No. As per the Supreme Court’s December 2023 judgment, a nominee holds the units in trust for the legal heirs. Ownership is decided by succession law or the investor’s will.
Make your investments easy to pass on
Nomination takes a few minutes, and it can save your family months of paperwork. Check every folio, name your nominees, and pair your nomination with a will.
DhanTarang Fintech Pvt Ltd is an AMFI-registered Mutual Fund Distributor (MFD) based in Mumbai. Our team can help you review the nomination status of all your folios and update them in one go. Explore our mutual fund services, complete your KYC or talk to our team.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This article is for general information only and is not investment, tax or legal advice. For succession or estate planning, consult a qualified legal professional. DhanTarang Fintech Pvt Ltd is an AMFI-registered Mutual Fund Distributor, ARN-343986.
