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Portfolio Management Services have operated under a dedicated SEBI framework since 1993. The structural difference from a mutual fund is simple to state and easy to miss: securities sit directly in your demat account, so every decision the portfolio manager makes is one you can trace, and one that has its own tax consequence. Here's exactly how that works, the SEBI limits around it, and where a distributor like us fits into it.
Illustrative only, not an actual portfolio or a recommendation. Because you hold each stock directly, your statement shows the same company names the portfolio manager traded — not a single NAV figure standing in for the whole basket.
SEBI recognises exactly three PMS structures. What separates them is a single question: who decides when a trade happens.
The portfolio manager decides and executes trades on your behalf, within the mandate set out in your agreement — you don't approve each transaction as it happens. This is the most widely used structure in India, and the one most PMS marketing refers to by default.
The portfolio manager proposes each transaction, but nothing is executed until you approve it. You retain the final call on every trade, at the cost of needing to be reachable and responsive for the account to function as intended.
The provider recommends a portfolio structure and specific transactions, but execution happens through your own broker or account — the provider never places the trade itself. This is the official SEBI category name for the structure; it's the one form of PMS where the provider never has trading authority over your holdings.
| Mutual Fund scheme | PMS | |
|---|---|---|
| What you own | Units representing a share of a pooled scheme | The underlying shares themselves, in your own demat account |
| Entry point | As low as ₹500 (SIP) or ₹1,000 (lumpsum), scheme-dependent | ₹50 lakh, maintained throughout the holding period |
| Portfolio composition | Fixed by the scheme's category and mandate; shared across all unit holders | Built around a chosen investment approach; can vary client to client within that approach |
| Tax event | Only on your own redemption of units | Every rebalance the portfolio manager makes, since you hold the shares directly |
| Cost structure | A single Total Expense Ratio, SEBI-capped, deducted from NAV | Management fee, optional performance fee, brokerage and capped operating expenses, billed to your account |
| Reporting | NAV and scheme factsheet | Statement of your actual holdings, transactions and realised gains |
Every provider discloses its own fee schedule in the Disclosure Document. Move the sliders to see how a fixed-fee-only structure compares with a hybrid one — figures are illustrative industry ranges, not any specific provider's charges.
Before brokerage and applicable GST
This is a rough, illustrative sketch to show how the two fee models behave differently across return outcomes — not a projection, not investment advice, and not any provider's actual pricing. GST of 18% applies on fees separately. Always read the Disclosure Document before committing capital.
Where an exit load applies, it's capped at 3% in year one, 2% in year two, 1% in year three — and nil after three years, regardless of provider.
A performance fee can only be charged on gains above the portfolio's previous peak value — never on ground the portfolio is simply recovering.
Investment in securities of the portfolio manager's own associates is limited to 30% of your account's value, and only with your specific consent.
Performance must be reported to you net of all fees and expenses, so the number you see already reflects what you actually kept.
Portfolio managers cannot borrow securities or funds on your behalf for equity exposure — hedging-related use of derivatives is the only leverage-like activity permitted.
Every portfolio manager must display and offer an option to onboard directly, without any distributor in between — SEBI requires this to be disclosed on the website and in the Disclosure Document.
There's no separate "PMS tax rate." Since the securities sit in your own demat account, every sale the portfolio manager makes is taxed under the same rules that would apply if you'd placed the trade yourself.
Every buy and sell the portfolio manager makes inside your account is its own taxable event — a portfolio that rebalances often can generate more, smaller, tax events across a year than a mutual fund scheme with the same return would.
Because gains, losses and dividends land directly in your own return, your year-end tax filing needs the transaction statement your portfolio manager and custodian issue — this is materially more involved than filing against a single mutual fund capital-gains statement.
PMS investments are subject to market risk, and returns are not guaranteed by SEBI or any provider. Read the Disclosure Document before investing. Tax treatment reflects rules in force as of this year and can change with future Finance Acts — this is not tax advice; speak to a chartered accountant for your specific position.
SEBI requires that any commission earned by a distributor for onboarding you be paid only on a trail basis, and only out of the fee the portfolio manager itself receives — never billed to you separately or added on top of the fee schedule in the Disclosure Document.
SEBI recognises a valid AMFI Registration Number as sufficient for a distributor to onboard clients to a Portfolio Manager, for as long as that registration stays valid — the same registration that governs how mutual fund distribution works in India.
SEBI first frames Portfolio Management Services with a ₹5 lakh minimum investment — the starting point of a rule that has been revised twice since.
SEBI more than quadruples the minimum ticket, an early step in steering the product toward investors able to carry concentrated, single-portfolio risk.
The SEBI (Portfolio Managers) Regulations, 2020 double the minimum to ₹50 lakh, raise the manager's net worth requirement to ₹5 crore, ban upfront fees outright, and cap operating expenses at 0.50% a year.
SEBI mandates certification for anyone distributing PMS or making fund-management decisions, while recognising existing AMFI-registered and NISM-certified distributors for as long as their registration remains valid.
SEBI consolidates close to forty separate circulars into one Master Circular for Portfolio Managers, covering registration, direct onboarding, custodian requirements and distributor oversight in one reference document.
