Skip to content

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

For a client of a portfolio manager under a discretionary PMS, who is generally treated as the person liable to pay tax on the gains arising from the portfolio's transactions?

The client is liable to pay tax. In a PMS the portfolio is held in the client's own account, so gains, dividends and interest are the client's income. The portfolio manager acts only as an agent and does not pay tax on the client's gains.

  1. AThe portfolio manager, because it executes the trades
  2. BThe client, because securities are held for the client's benefit and gains are the client's incomeCorrect
  3. CThe custodian, because it holds the securities
  4. DSEBI, through a collective pool tax

Explanation

A PMS is not a pooled vehicle. Securities are held in the individual client's account, so gains, dividends and interest are the client's income and the client is taxed on them. The portfolio manager is only an agent, and neither the custodian nor SEBI is a taxpayer on these gains.

Did you get it right without looking?

One question tells you little. A timed set on Taxation (NISM XXI-A) shows your real accuracy, how long you take and where you lose marks.

Practise Taxation (NISM XXI-A)Free diagnostic mock

More Taxation (NISM XXI-A) questions