What Is PMS? Portfolio Management Services in India, Explained

What is a Portfolio Management Service?

A Portfolio Management Service (PMS) is an investment service in which a SEBI-registered portfolio manager builds and manages a portfolio of securities on your behalf — mostly listed Indian shares, and in some strategies bonds or other instruments. PMS is regulated under the SEBI (Portfolio Managers) Regulations, 2020.

The defining feature is direct ownership. In a mutual fund, your money is pooled with thousands of other investors and you own units of the fund. In a PMS, the securities are bought in a demat account opened in your own name. You can see every stock you own, every trade the manager makes and every rupee of dividend you receive.

That is why a PMS is often described as a separately managed account: the manager runs one strategy, but each client holds an individual portfolio built to that strategy.

How a PMS works, step by step

1. Choose a strategy. Each portfolio manager offers one or more strategies — large-cap, multi-cap, small and mid-cap, thematic or multi-asset, for example — described in its Disclosure Document.
2. Complete onboarding. You sign the portfolio management agreement and complete KYC, and a bank account and demat account are set up in your name.
3. Fund the account. You bring in at least ₹50 lakh as money, existing shares, or a combination. The manager may sell transferred shares that don’t fit the strategy — and those sales can trigger capital gains tax for you.
4. The manager invests. In a discretionary PMS, the manager buys and sells securities in your account according to the strategy. An independent custodian holds the assets and keeps records.
5. You receive reporting. Regular statements — at least quarterly — show holdings, transactions, fees and performance, along with the capital gains statements you need for your tax return.
6. Exit when you choose. You can withdraw partially or fully. Exit loads are capped by SEBI, and securities can often be transferred to you rather than sold.

Discretionary, non-discretionary and advisory PMS

When people talk about “PMS” in India, they usually mean a discretionary PMS, which is what the rest of this guide focuses on.

Who can invest, and the ₹50 lakh minimum

SEBI sets the minimum investment in a PMS at ₹50 lakh. It was raised from ₹25 lakh in 2019, to keep a concentrated, actively managed product in the hands of investors able to bear its risks.

• The ₹50 lakh can be contributed as money, as securities you already hold, or both.
• Resident individuals, HUFs, companies, trusts, partnership firms and LLPs can invest, as can NRIs — see our guide for NRIs.
• Once the minimum is met, top-ups are usually allowed in smaller amounts.

What a PMS costs

PMS fees are set out in the Disclosure Document and in the agreement you sign. The common structures are:

• Fixed fee: a percentage of your portfolio value each year — commonly in the range of 1% to 2.5%.
• Performance fee: a share of returns above a hurdle rate, typically 10% to 20% of the excess, charged on a high-water-mark basis so you don’t pay twice for the same gains.
• Hybrid: a lower fixed fee plus a performance fee.

SEBI’s rules add important protections: no upfront fees may be charged; operating expenses, excluding brokerage, are capped at 0.5% a year; and exit loads are capped at 3% in the first year, 2% in the second and 1% in the third, with none after that. GST at 18% applies to fees.

The fee structure can move your net return more than you might expect. Our guide to PMS and AIF fees works through the numbers.

How PMS returns are taxed

Because the shares sit in your own demat account, a PMS is taxed as if you had made every trade yourself. Each time the manager sells a holding, you have a capital gain or loss:

• Listed shares held for 12 months or less: short-term capital gains, currently taxed at 20%.
• Listed shares held for more than 12 months: long-term capital gains, currently taxed at 12.5% on gains above ₹1.25 lakh a year.
• Dividends are taxed at your slab rate.

Portfolio turnover therefore matters: a strategy that trades frequently generates more short-term gains. A mutual fund, by contrast, pays no tax on trades inside the fund. We cover all of this in how PMS and AIFs are taxed.

Advantages and trade-offs

Who should consider a PMS?

A PMS tends to suit investors who:

• have investable wealth comfortably above ₹50 lakh, so that one strategy doesn’t become an outsized share of their net worth;
• have a long horizon — ideally five years or more — to ride out periods when a concentrated strategy lags the market;
• value transparency and direct ownership; and
• want the PMS to play a defined role within a wider plan, rather than to be a standalone bet.

Choosing the manager matters more than choosing the product. Work through our 10-point PMS due diligence checklist before you commit, and see what the process looks like end to end when you invest in a PMS through us.

How investors are protected

• Every portfolio manager must be registered with SEBI and maintain a minimum net worth of ₹5 crore.
• Your assets are held by an independent custodian in your name, separate from the portfolio manager’s own assets.
• Performance must be reported on a time-weighted basis and compared with benchmarks set for each strategy category, so managers can be compared fairly. APMI, the industry association, publishes this data.
• You receive a Disclosure Document before signing, setting out the strategy, risks, fees and the manager’s track record.
• Complaints can be raised with the portfolio manager and, if unresolved, through SEBI’s SCORES portal and its online dispute resolution mechanism.

Frequently asked questions