PMS for NRIs: how portfolio management services work
A Portfolio Management Service (PMS) is a SEBI-regulated arrangement where a registered portfolio manager runs a portfolio of stocks and other securities held directly in your name, in your own demat account — not as units of a pooled fund. SEBI sets the entry at ₹50 lakh per investor (providers may set higher floors), and NRIs can invest through their NRE or NRO accounts under FEMA. This page explains the structure, the access route, and — most importantly for NRIs — how the tax treatment differs from mutual funds.
PMS vs mutual funds: the structural difference
| Aspect | PMS | Mutual funds |
|---|---|---|
| What you own | The shares themselves, in your own demat account, visible holding by holding. | Units of a trust — the fund owns the shares; you own a slice of the pool. |
| Entry point | ₹50 lakh minimum per investor, set by SEBI. | From ₹500 via SIP. |
| Management | Discretionary (manager decides and executes) or non-discretionary (manager proposes, you approve), under an individual agreement. | One scheme, one mandate, identical for every unitholder. |
| Tax events | Every sale the manager makes is your taxable event — the year's churn lands in your ITR, supported by the manager's audited statement. | The fund's internal churn isn't taxed in your hands; tax arises only when you redeem units or receive IDCW. |
| Treaty treatment | Gains are on shares of Indian companies — the DTAA shares clause keeps them taxable in India for every treaty country. | Units are not shares — per ITAT rulings the residual clause can assign gains to the residence country (under appeal). |
How NRIs access PMS
The building blocks: an NRE or NRO bank account (which one matters — see below), a demat and trading account in your own name opened for the PMS, the PMS agreement with a power of attorney allowing the manager to operate the account, and completed KYC plus the FATCA/CRS self-certification. For the repatriable route through an NRE account, a designated PIS (Portfolio Investment Scheme) permission from the bank is typically part of the setup; exact requirements vary by custodian and bank, so the checklist is confirmed during onboarding. Acceptance of US and Canada residents varies by PMS provider — some onboard them with additional declarations, others don't — which is worth confirming before starting paperwork.
How PMS is taxed for NRIs
Because you own the securities directly, every sale inside the portfolio is your personal taxable event, even though the manager makes the call. On listed equity at current rates: long-term gains (held over 12 months) at 12.5% beyond the ₹1.25 lakh annual exemption under Section 112A; short-term gains at 20% under Section 111A; dividends subject to NRI TDS with treaty caps where a TRC and Form 10F are in place. The manager's audited annual statement is what goes into your ITR.
The treaty position is the sharpest contrast with mutual funds. PMS gains arise on shares of Indian companies, and the shares clause of India's treaties (Article 13(4) in the UAE and Singapore treaties, for example) keeps those gains taxable in India regardless of where you live — there is no residence-country escape of the kind the ITAT has recognised for mutual fund units under the residual clause. Where your residence country also taxes the gain, relief comes as a foreign tax credit there, not an Indian exemption. The country-by-country effect is in our DTAA tax visualizer — switch to the Stocks / PMS tab and compare it with the equity-MF tabs.
Illustrative only · Not investment, tax or legal advice. Rates for FY 2025–26 excluding surcharge/cess; treaty positions on mutual fund units are under departmental appeal; provider requirements vary. Wealth North is a mutual fund distributor and distributes PMS/AIF products; it does not provide investment advice. Consult a qualified professional for your situation.