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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.
HNI wealth · PMS
PMS taxation: why each trade creates your tax liability directly
Updated . Every paid answer is checked by a CA. Free AI answers are labelled until a CA verifies them.
Provisions
IT Act, Sec 67 (old 45; capital gains) | SEBI PMS Regulations 2020
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.
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