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

Which of the following is a feature of how a PMS investor's dividend income from the portfolio is taxed?

Dividends are taxable in the client's hands at the applicable rates when received, and TDS may apply under the law. They are not exempt for everyone, not taxed to the portfolio manager, and not deferred until the PMS account is closed.

  1. ADividends are exempt in the hands of all clients
  2. BDividends are taxable in the client's hands at the applicable slab or special rates, and TDS may apply as per lawCorrect
  3. CDividends are taxed only in the hands of the portfolio manager
  4. DDividends are taxed only when the client closes the PMS account

Explanation

Dividends received on shares in a PMS portfolio belong to the client, and are taxable as income from other sources at the client's applicable rate when received. TDS may apply under the law. They are not deferred until account closure and are not taxed to the portfolio manager.

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