NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Taxation (NISM XXI-A)
Which statement about the tax treatment of the portfolio management fee paid by a PMS client is correct?
The portfolio management fee attracts GST, because portfolio management is a taxable service and GST is charged on the fee amount. The fact that the underlying assets are securities does not make the fee exempt, and the fee is not a capital gain item.
- AFee is subject to GST charged on the fee amountCorrect
- BFee is exempt from GST since it relates to securities
- CFee is deducted from the client's tax rate
- DFee is a capital gain adjustment taxed on the manager
Explanation
Portfolio management is a service, and GST is levied on the fees charged to the client, at the prevailing rate. It is not exempt merely because the underlying assets are securities. The fee is not a capital gain item for the manager.
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