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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Taxation (NISM XXI-A)

Dividends received in a client's PMS account from listed companies are, under the current Indian tax approach as generally taught, taxed in whose hands and under which head?

Dividends are taxed in the client's hands under income from other sources at the applicable slab rate. The client is the beneficial owner of the shares in a PMS account, so the dividend is the client's income and not that of the manager or depository.

  1. AThe company, under capital gains
  2. BThe client, under income from other sources at the applicable slab rateCorrect
  3. CThe portfolio manager, under business income
  4. DThe depository, under income from house property

Explanation

Dividend income is taxable in the hands of the shareholder, here the client who owns the securities. It is classified under income from other sources and taxed at the client's slab rate, with TDS where applicable. It is not capital gains, and neither the manager nor the depository earns it.

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