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

In the case of a PMS client's portfolio of listed equity shares, when are the securities in the portfolio treated as being held by the client for the purpose of computing the holding period for capital gains?

The holding period for each security is counted from the date it was actually bought for the client's account, whether by the client or by the portfolio manager on the client's behalf. It is not reset by rebalancing or tied to the agreement date.

  1. AThe holding period is counted from the date the client purchased or the portfolio manager purchased the shares on the client's behalfCorrect
  2. BThe holding period restarts every time the portfolio manager rebalances the portfolio
  3. CThe holding period is counted only from the date the client signed the PMS agreement
  4. DThe holding period is counted from the end of the financial year in which shares were bought

Explanation

In a discretionary or non-discretionary PMS, securities are held in the client's own name (or in a custodian account for the client), so each security has its own holding period. Buying is by the manager on behalf of the client, so the period runs from the actual purchase date of that security. Rebalancing does not reset the holding period of securities that are retained.

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