The requirement for nomination/opting out of nomination for all existing individual unit holders owning mutual fund units, either singly or jointly, before the deadline, or the folios will be frozen for debits, was specified by the Securities and Exchange Board of India (SEBI).
The deadline to add nominee in mutual funds is September 30, 2023 for now. However, there are chances that SEBI may announce the extension in coming days.This is because Sebi extended the deadline for existing demat account holders to offer a choice of nomination by three months to December 31, 2023 on September 26, 2023. Previously, the deadline for existing eligible trading and demat account holders to provide a nomination preference was September 30, 2023.Also read: Trading account nominee rule changed; last date to add demat account nomination extended
According to the CAMS website, “Providing nomination or Opting-out confirmation has already been mandated in the case of new MF investors for folios created from 01-Oct-2022. Nomination in folios held by investors where folio was created prior to 01-Oct-2022 must be complied with on or before 30-Sep-2023 by either submitting nominee details or by providing Opt-out declaration.”
Please keep in mind that if the required information is not registered within the above timeframes, transactions such as Redemptions, SWP, Switch, STP will be frozen in the corresponding folios beginning October 1, 2023.
Also read: Give nominee details for mutual funds by this date to avoid MF folio getting frozen
Mutual fund unit holders can add nominee or opt-out of nomination by providing the declaration.
How many nominees can be added
A maximum of three nominees can be added. When there are several nominations, the percentage of allocation or share should be expressed in whole numbers only, without any decimals, and should sum up to 100%. The nomination request will be deemed invalid and rejected if the sum of the allocation percentages among all of the nominees does not equal 100%. If the percentage of each nominee’s allocation or share is not specified, the claim settlement will be divided equally among all of the nominees.
Important points to know on mutual fund nomination
- Nomination made by a unit holder will be applicable for units held in all the schemes under the respective folio, account.
- A Non-Resident Indian can be nominated subject to the applicable exchange control regulations.
- The Nominee shall not be a trust (other than a religious or charitable trust), society, body corporate, partnership firm, Karta of Hindu Undivided Family, or a Power of Attorney holder.
- Nomination is not allowed in a folio of a Minor unitholder.
- It is possible for a minor to be nominated. In that case, the name and address of the minor nominee’s Guardian must be provided.
- If the units are held jointly (i.e., in case of multiple unitholders in the folio), all joint holders need to sign the Nomination Form (even if the mode of holding/operation is on “Anyone or Survivor” basis).
Mutual Fund units held in demat form
According to the Association of Mutual Funds India (AMFII), “As regards mutual fund units held in electronic (demat) mode with a depository, the nomination details provided by the Unitholder to the depository will be applicable to the mutual fund Units held in demat mode. Such nomination including any variation, cancellation or substitution of Nominee(s) shall be governed by the rules and bye-laws of the Depository.”
If a demat account contains joint holders, the securities will be transferred to the remaining holder(s) in the event that any of the joint holders pass away. The Units will only be transferred to the nominee in the case of the demise of all joint holders.