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

Which statement about the tax treatment of fees paid by a PMS client to the portfolio manager is most appropriate for a PMS distributor to share?

PMS fees attract GST because portfolio management is a taxable service, and whether the client can claim any deduction depends on the head of income and prevailing law. A distributor should avoid assuring blanket deductibility or a GST exemption.

  1. APMS fees are always fully deductible from the client's salary income
  2. BPMS fees cannot be considered at all in any computation of income
  3. CPMS fees are subject to GST charged by the portfolio manager, and deductibility depends on the client's head of income and prevailing lawCorrect
  4. DPMS fees are exempt from GST because they are linked to securities

Explanation

Portfolio management is a taxable service, so GST applies on the fees. Whether the fee can be claimed as an expense depends on the client's income heads and current provisions, so a distributor should not promise a deduction. The other options make absolute claims that are incorrect.

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