Taxability and related provisions for Income through investment under PMS plan

At present, there is no specific provision which provides for taxation of PMS income & so it is taxed under the normal provision. Taxation in such cases is a matter of debate, divergent & conflicting views. In general, the principles governing the taxation in case of direct investments will govern the taxation of PMS as well.

Courts have held that transactions carried out by the PMS Manager are in the nature of transactions for maximization of wealth,  it could not be said that the main object of holding the portfolio was to make profit by sale of shares during the course of its investment activities.

With this view, profit from PMS can be characterized as “Capital Gain” income.

One can place reliance on the following cases:

• Salil Shah Family P. Trust vs. ACIT [2013] 36 Taxman n 543 (Mumbai ITAT.)

As said, it can be treated on same path, though there are no clear guidelines from ITD.

You can treat long term capital gains when shares are sold after 1 year and take benefit of 1 Lakh exemption. While for shorter duration, flat 15% tax to be assessed.