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 assessee liable to pay tax on the capital gains arising from the securities sold in the portfolio?

The client is liable for tax on gains from a PMS portfolio. The securities belong to the client and the Portfolio Manager only acts as an agent, so capital gains, dividends and interest are taxed in the client's own hands.

  1. AThe Portfolio Manager, as the person who takes the investment decisions
  2. BThe client, since the securities are held in the client's own name or on the client's behalfCorrect
  3. CSEBI, as the regulator of Portfolio Managers
  4. DThe custodian, as the holder of the securities

Explanation

A PMS is not a pooled vehicle. The portfolio belongs to the client, so gains and income from it are taxed in the client's hands. The Portfolio Manager only acts as an agent and is not the taxpayer on those gains. The custodian merely holds the securities.

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