“It has been decided that a standard reason code, namely ‘TLH’, will be used by the reporting entities while the transfer of the securities of candidate to the legal heir to the CBDT is reported to make the correct application of the provisions of the Income Tax Act, 1961, 1961,” Sebi said in its circular.
The new report code will take effect from January 1, 2026.
The nominated acts as a trustee of the effects of the original security holder and transfers the effects to the legal heir as per follow -up plan.
Under the current system, when a candidate transfers effects to a legal heir, the transaction can sometimes be treated as a ‘transfer’ and assessed for power gain tax.
In his circular, Sebi noted that the payment of the tax by the candidate in such a situation may not be suitable, since in terms of clause (III) of section 47 of the Income Tax Act, 1961, such a transfer is exempt and is not considered ‘transfer. “Although the candidate can claim to claim such a tax, this process causes discomfort for the candidate,” said the circular. To resolve this, Sebi formed a working group that is engaged directly at the Central Council of Direct Taxes (CBDT) and ordered the use of a new reporting code ‘.
Sebi has ordered all reporting entities, including RTAs, listed companies, depositors and Depository participants, to use the ‘TLH’ code from January 1, 2026 when reporting these transactions to CBDT.
Previously streamlined Sebi the process of naming nominees.
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