One of the many benefits of opening a demat account is that it allows an investor to add a nominee. It allows the transfer and inheritance of shares in case the demat account holder passes away. It is beneficial for the legal heirs or nominees who are involved in the transfer of these assets to be familiar with this process. Additionally, knowledge of how to open a Demat account is essential for managing inherited shares effectively.

Transferring the Shares to Legal Heirs or Nominees

The first step in the process involves determining if a nominee has been appointed for the Demat account. Having a nominee simplifies the transfer of shares directly into the nominee’s Demat account. In the absence of a nominee, the process becomes more complex and is based on legal documentation.

Remember that you need to know how to open a demat account . Adding a nominee guarantees that, in the event of your death, your shares can be easily transferred to the beneficiary of your choice.

With a Nominee

If a nominee is registered, the transfer process is relatively straightforward. The nominee must submit the death certificate of the deceased account holder, a duly filled transmission request form, and proof of identity to the Depository Participant (DP) where the Demat account is maintained.

Once these documents are verified by the DP, the shares are credited to the nominee’s Demat account. In this situation, it is helpful to know how to open a Demat account if the nominee does not already have one.

Without a Nominee

In the event that no nominee is registered, further documentation is required from the legal heirs, including a succession certificate, a copy of the death certificate, an affidavit, and a properly completed transmission request form. After the Depository Participant (DP) verifies these documents, the shares are transferred to the legal heirs’ Demat accounts.

Importance of a Will in Share Transfer

A well-drafted will that specifies the distribution of shares can greatly simplify the transfer process. It should include the name of the nominee eligible to receive the shares, reducing uncertainty and expediting the transfer. If the beneficiaries are clearly named in the will, the transfer of shares can proceed smoothly with the assistance of the will and other relevant documents.

Tax Implications of Inheritance of Shares

It is important to understand the tax implications associated with inherited shares. In India, the inheritance of shares is exempted from tax. However, if the legal heirs choose to sell the inherited shares, they are required to pay capital gains tax on the profits realized from the sale. The cost of acquisition for calculating capital gains is based on the original purchase price of the shares paid by the deceased account holder.

Demat Account Opening Process for Managing Inherited Shares

Nominees or legal heirs without a Demat account must open one before they can receive and manage their inherited shares. The process of how to open a Demat account involves the following steps:

• Selection of a Depository Participant (DP): Choose a DP, which may be a bank, financial institution, or brokerage firm registered with NSDL or CDSL.
• Submission of Application Form: Submit the account opening form provided by the DP, along with personal details, bank account information, and proof of identity and address.
• Document Requirements: Provide copies of identification proof (e.g., PAN card), address proof, a passport-sized photograph, and a canceled cheque.
• In-Person Verification: Some DPs require in-person verification, either by visiting the DP’s office or through online video verification.
• Issuance of Demat Account Number: After the e-KYC and document verification by DP, a unique Demat account number is issued.

Conclusion

The inheritance of shares within a Demat account requires a structured and compliant process in India. Whether a nominee or a legal heir is involved in procuring the shares, it is essential to follow the necessary procedures and formalities. Additionally, understanding how to open a Demat account is imperative for those managing inherited shares.