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HNI wealth · PMS

PMS taxation: why each trade creates your tax liability directly

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  1. Facts

    In a mutual fund, the fund pays tax, not you. In PMS, the portfolio manager trades on your behalf, but every trade creates capital gains in YOUR hands. You get a Statement of Account showing every buy and sell.

  2. Provisions and law

    • IT Act, Sec 67 (old 45

  3. Analysis

    If your PMS manager trades actively (churns the portfolio), you could have hundreds of short-term capital gains transactions in a year, all taxable at 20% STCG. A PMS that generates 18% gross return with high churn might deliver only 12-13% post-tax. What to ask your PMS manager: Portfolio turnover ratio. Average holding period. LTCG vs STCG split in their historical deliveries. A value-oriented PMS with low turnover (<30%) is significantly more tax-efficient than a momentum PMS with 200%+ turnover.

  4. Conclusion

    Talk to a Savvy for the exact next step on your case.

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Updated return, ITR-U, Sec 263(6) (old 139(8A))

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