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

Which of the following statements best describes tax deducted at source on a PMS client's portfolio income such as interest on debentures?

Tax may be deducted at source by the payer of the interest, and the client reports the income in the return and claims credit for the TDS. The income remains taxable to the client, and the Portfolio Manager does not settle the final tax.

  1. AInterest is exempt from tax in a PMS portfolio
  2. BTax may be deducted at source by the payer, and the client claims credit for it when filing the returnCorrect
  3. CThe Portfolio Manager pays the final tax and the client need not report the income
  4. DTDS applies only to non-resident Portfolio Managers

Explanation

Interest income received in the portfolio is taxable to the client. The payer may deduct TDS under the Income-tax law, and the client reports the income and claims credit for TDS in the return. The Portfolio Manager does not discharge the final liability on the client's behalf.

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