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

Which of the following is generally the position regarding the tax a PMS client bears on expenses such as the portfolio manager's management fee?

GST applies to the PMS management fee, and the portfolio manager charges it to the client over and above the fee. It is not exempt, it is not salary income, and it is not automatically added to the cost of every security.

  1. AManagement fee is always fully exempt from GST
  2. BManagement fee is added to the cost of acquisition of every security automatically
  3. CManagement fee is attracted by GST, which is charged by the portfolio manager over and above the feeCorrect
  4. DManagement fee is always taxed as the client's salary income

Explanation

The portfolio manager provides a taxable service, so GST is levied on the fee and charged to the client. It is not salary income and is not exempt. Fee treatment as part of acquisition cost is not automatic.

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