Gift u/s 56 (2) (vi) of Income tax Act,1961

 Under Section 56, exemption is granted in respect of any sum of money received under a Will or by way of inheritance.

so its obvious that nomination is covered as only nominees will inherit and any money on inheritance is exempted

it is exempt.

 its exempt

YES IT IS EXEMPT

But i do have one reservation...one has an Fixed Deposit and he nominates a relative's name as a nominee..the person dies and thew nominee inherits the right to the FD though not automatically but through transfer in his name as mentioned in the Bank's clauses..would that take the form of inheritance as inheritance is termed as succession by descent...

 I think Principal Amount of FD will be exempt and only interest on FD will be taxable under other sources.

And inheritance is not always by succession, a nominee may or may not  be a successor but he will inherit.