A -resident Indian (NRI) who has a mutual fund folio, a demat account and a bank account in India will find that each of these institutions asks the family for documents after the account holder passes away. If a nominee is not named on each account the claims will be handled through heir documents, which often come from another country making the process longer and more complicated.
NRI nomination and succession involve two steps: naming a nominee on each account and describing in a will who the legal heirs are. A nominee receives the assets from the institution while a will and succession law determine who finally owns them.
What a nominee does and does not do
A nominee is the person to whom the institution gives the assets after the account holder dies. For funds and demat accounts SEBI rules state that the nominee acts as a trustee who receives the assets on behalf of the heirs so a nomination does not replace a will or succession law. The institution is also not responsible for any conflicts between nominees and other claimants.
A SEBI circular dated 10 January 2025 allows up to 10 nominees on each mutual fund folio or demat account with each nominee getting a percentage share. Single-holder accounts must name a nominee. Confirm that they choose not to. Insurance works differently because an insurance nominee can depending on the policy and the relationship hold the proceeds as the owner of as a trustee.
The step-by-step process
| Step | What it involves |
|---|---|
| List every account | NRE (non-resident external) and NRO (non-resident) bank accounts, mutual fund folios, demat accounts, fixed deposits and insurance policies all need a nominee. |
| Add nominees on each | The details include name, relationship, an identifier such as PAN, Aadhaar or passport number, address and the percentage share. |
| Keep contact details current | Claims by nominees living abroad may need notarized or attested documents and having email and phone details helps speed up the process. |
| Review after life events | A marriage, a birth, a death in the family or a change of country calls for a review of each nominee. |
Why a will matters alongside nominations
Succession rules in India vary by religion and personal law. A will sets out the owners wishes for each asset. Assets without a will are handled under succession law and heirs may need a heir certificate or a succession certificate to claim them depending on the institution. A will is easier to act on when it lists each account and names an executor who can handle paperwork in India.
What heirs living abroad need to know
Non-resident heirs can inherit securities under the Foreign Exchange Management Act (FEMA). The assets are normally transferred into an NRO-linked demat account or mutual fund folio, which requires a PAN for the heir. Sale proceeds can be sent back from the NRO account up to USD 1 million per year to tax compliance. Amounts above that limit need permission. Capital gains tax applies when the heir sells, with TDS deducted for non-resident sellers.
The tax treatment
India has no inheritance tax because estate duty was abolished in 1985 and inheriting assets is not taxed in India. Tax is due when the heir sells the inherited investments. The owners purchase cost and holding period carry over to the heir. The heirs country of residence may tax the inherited assets or later gains under its rules so estates that spread across countries often need advice from someone with both systems.
What NRI investors should take from this
Nominations and a will do different things. Leaving either one shifts the work to family members who may be in another country. A holdings list kept on a platform such as Kuvera, which offers funds makes the first step of a nomination review faster.
Frequently Asked Questions
1. How many nominees can be added to a mutual fund folio?
Up to 10 nominees can be added to a mutual fund folio or demat account with a percentage share for each.
2. Does a nominee become the owner of the investments?
For funds and demat accounts the nominee receives the assets as a trustee on behalf of the heirs so a will and succession law decide final ownership.
3. Is there inheritance tax on investments?
No. India has no inheritance tax and tax arises when the heir sells the inherited investments.
4. How much can a non-resident heir repatriate each year?
A non-resident heir can repatriate up to USD 1 million each year from the NRO account if tax compliance is satisfied. If a non-resident heir wishes to repatriate than USD 1 million separate permission is required.
5. Why does a will matter when nominees are already added?
A nominee holds the assets on behalf of the heirs. The will tells who the legal heirs are and how each asset should be divided.
