SEBI proposes ‘TLH’ code for transmission of securities to legal heirs

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  • Last Updated on 14 August, 2025

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SEBI TLH code transmission of securities legal heirs nominee tax reporting Income Tax Act 1961 CBDT

Consultation Paper; dated: 12.08.2025

Background on Current Reporting Practice
At present, the transmission of securities from a nominee to a legal heir is not distinctly identified in reporting systems. Instead, such transactions are often treated as routine sales of securities, without distinguishing them as non-sale transfers arising from inheritance or succession. This lack of specific reporting creates potential issues in applying the correct tax provisions.

SEBI’s Proposed Change
To address this gap, the Securities and Exchange Board of India (SEBI) has proposed the introduction of a new standard reason code, ‘TLH’ (Transmission to Legal Heir). This code would be used by reporting entities—such as brokers, depositories, and other intermediaries—when reporting such transmissions to the Central Board of Direct Taxes (CBDT).

Objective of the Proposal
The primary aim of introducing the ‘TLH’ code is to ensure that transmissions to legal heirs are correctly recognized in tax records. By doing so, the proper provisions of the Income Tax Act, 1961, can be applied without misclassifying such transfers as taxable sales. This measure is expected to reduce ambiguity and improve compliance for both taxpayers and reporting entities.

Timeline and Call for Feedback
SEBI has invited public comments on the proposal, with the submission deadline set for September 2, 2025. Stakeholders, including market intermediaries, investors, and legal professionals, are encouraged to share their views to help refine and finalize the proposed reporting framework.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied