NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Taxation (NISM XXI-A)
Which statement best describes the tax position of the dividend and interest income received by a PMS client from the portfolio's securities?
Dividend and interest are taxed in the client's hands as income from other sources, with credit for any TDS deducted. They are not exempt merely because of the PMS route and are not capital gains.
- AIt is tax-exempt when received through a PMS
- BIt is taxed in the portfolio manager's hands
- CIt is taxed in the client's hands under the head income from other sources, subject to applicable TDSCorrect
- DIt is treated as long-term capital gain
Explanation
Dividend and interest are not capital gains. They are generally taxed as income from other sources in the client's hands. TDS may be deducted at source where the law requires, and the client takes credit for it when filing a return.
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