What is PMS?
PMS (Portfolio Management Services) is an investment service where a SEBI-registered portfolio manager builds and runs a portfolio of stocks for you. Unlike a mutual fund, you do not buy units of a common pool: the shares are bought in your own demat account, so you can see every stock you own. The minimum investment is ₹50 lakh.
Types of PMS
- Discretionary: the manager decides what to buy and sell. Most PMS in India work this way.
- Non-discretionary: the manager suggests trades and carries them out only after you approve.
- Advisory: the manager only gives advice; you place the trades yourself.
PMS vs mutual fund
| PMS | Mutual fund | |
|---|---|---|
| Minimum investment | ₹50 lakh | ₹100 to ₹5,000 |
| What you own | Shares in your own demat account | Units of a common fund |
| Fees | Fixed fee and/or profit share, plus 18% GST | One expense ratio, taken from NAV |
| Tax | On every sale the manager makes, each year | Only when you redeem |
| Portfolio | Usually 15 to 30 stocks, can be tailored | Often 40 to 80 stocks, same for everyone |
| Regulator | SEBI | SEBI |
Frequently asked questions
What is PMS?
PMS (Portfolio Management Services) is a service where a SEBI-registered portfolio manager invests your money in stocks and other securities for you. The shares are held in your own demat account, so you own them directly.
What is the minimum investment in PMS?
SEBI sets the minimum at ₹50 lakh. You can invest it as cash, as shares you already hold, or as a mix of both.
What fees does a PMS charge?
Most charge a fixed fee of about 1% to 2.5% of your assets a year, a performance fee (often 10% to 20% of profits above a hurdle rate), or a mix of both. GST of 18% is added on fees. Exit load is capped at 3% in the first year, 2% in the second and 1% in the third, and there is none after three years.
How is PMS taxed?
Because you own the shares, every sale the manager makes is taxed in your name in that year: 20% on short-term gains and 12.5% on long-term gains above ₹1.25 lakh for listed shares, plus cess. Dividends are taxed at your slab rate. In a mutual fund you pay tax only when you redeem units.
Is PMS better than a mutual fund?
Not always. A PMS offers a concentrated portfolio and direct ownership, but costs more and needs ₹50 lakh. After fees and yearly taxes, many PMS strategies do not beat a low-cost mutual fund. Compare returns after fees before choosing.
How are PMS returns reported?
SEBI requires portfolio managers to report returns on a time-weighted basis (TWRR), after fees, and to compare each strategy with a common benchmark for its category. Returns for periods over one year are usually annualised.
Also see AIF returns, mutual fund returns and the capital gains tax calculator.