Archive · 3 Sep 2025
SEBI's New Code Aims to Prevent Tax on Inheritance
Imagine someone inherits stocks after a family member passes away.
Currently, these transfers are sometimes wrongly taxed like a sale.
The new TLH code aims to fix this by creating a special tag so that these transfers are recognized as inheritance, not a sale, and therefore, not taxed.
Experts say it's a good step, but the systems need to be updated, and they are unsure of the long-term impact.
Families are advised to make proper wills for a smooth transfer of inheritance.
The code should reduce tax issues, but everyone must remain cautious, so there is no tax evasion.
SEBI's TLH code seeks to stop misclassifying security transfers to legal heirs as taxable sales.
The current problem arises from reporting and automated systems recording inheritance transfers as sales.
The new code introduces a standardized TLH tag for registrars and depositories.
Experts expect immediate relief but compliance and potential misuse need careful monitoring.
Families are advised to prioritize estate planning, including creating proper wills.
- Who
- SEBI (Securities and Exchange Board of India)
- What
- Introduced the TLH code to prevent wrongful capital gains taxes on inheritance transfers.
- When
- The code is newly introduced.
- Where
- Affects financial markets and inheritance practices in India.
- Why
- To correct misclassification of inheritance transfers, aligning tax treatment with the law.
- Code Name
- Transmission to Legal Heirs (TLH)
- Target
- Misclassification of inheritance transfers as taxable sales
- Key Players
- SEBI, RTAs, Depositories, CBDT
- Income Tax Act Section
- Section 47, Clause (iii) exempts inheritance transfers
- Implementation Timeline
- 3 months post-circular issuance for system updates
- Expert Concerns
- Compliance, systemic issues, and potential misuse