What is PMS?
A Portfolio Management Service is a professionally managed portfolio of stocks, bonds or other securities, run by a SEBI-registered portfolio manager for one investor at a time. Unlike a mutual fund, where your money is pooled and you own units, in a PMS the securities are bought in your own demat account. You can see every holding, every trade and every rupee of fees.
PMS is aimed at high-net-worth investors. That's why SEBI sets a ₹50 lakh minimum: the products are less diversified, more expensive and riskier than a typical mutual fund, and the regulator wants investors who can absorb that.
The three types of PMS
Discretionary
The manager decides what to buy and sell, and when, without asking you each time. This is by far the most common type. Discretionary PMS cannot invest in unlisted securities.
Non-discretionary
The manager recommends and executes, but only after you approve each trade. You keep control but must respond quickly.
Advisory
The manager only advises. You decide and place the trades yourself. Fees are lower, but so is the hand-holding.
Most PMS offerings are run as a "model portfolio" strategy: every client in the strategy holds broadly the same 15–30 stocks, adjusted for when they joined. Themes include large-cap quality, mid- and small-cap growth, value, special situations, multi-cap and debt or fixed-income strategies.
PMS vs Mutual Fund vs AIF
| Feature | PMS | Mutual fund | AIF |
|---|---|---|---|
| Minimum investment | ₹50 lakh | ₹100–₹500 (SIP) | ₹1 crore |
| Ownership | Securities in your demat | Units of a pooled fund | Units of a pooled fund |
| Portfolio | Concentrated, can be customised | Diversified, standard | Private equity, credit, VC, hedge strategies |
| Typical cost | 1–2.5% a year, or a lower fixed fee plus a profit share | 0.1–2% a year (TER) | 1.5–2.5% a year plus carried interest |
| Liquidity | High, exit load in years 1–3 | High (except ELSS lock-in) | Low; Cat I & II are closed-ended for 3+ years |
| Tax | Each trade taxed in your hands | Taxed only when you redeem | Cat I/II pass-through; Cat III taxed at fund level |
| Regulation | SEBI (Portfolio Managers) Regulations | SEBI (Mutual Funds) Regulations | SEBI (AIF) Regulations, 2012 |
Read our full guide to Alternative Investment Funds (AIF) if you are also considering private equity or credit funds.
Fees and costs
PMS fees come in three models. The fee schedule must be in your agreement and the manager's Disclosure Document.
- Fixed fee: a percentage of assets every year, typically 1–2.5%.
- Performance fee: a share, often 10–20%, of returns above a hurdle rate. SEBI requires a high-water mark, so you never pay a performance fee twice on the same gains, or on recovering earlier losses.
- Hybrid: a lower fixed fee plus a smaller profit share.
On top of these you pay custody, brokerage, fund-accounting and other operating costs. SEBI bans upfront or entry fees altogether. Exit loads are capped at 3% of the amount withdrawn in year one, 2% in year two and 1% in year three, and nothing after that.
How PMS is taxed
Because you own the securities directly, each sale inside your PMS is your own capital-gains transaction, even if you never withdraw a rupee. Your PMS provider sends a capital-gains statement each year.
| Income | Tax treatment (for transfers on or after 23 July 2024) |
|---|---|
| Listed equity held ≤ 12 months | Short-term capital gains at 20% |
| Listed equity held > 12 months | Long-term capital gains at 12.5% on gains above ₹1.25 lakh a year |
| Dividends | Added to your income, taxed at your slab rate |
| Interest from bonds or debt | Taxed at your slab rate |
| PMS fees | Generally not deductible from capital gains (direct transaction costs such as brokerage and stamp duty are) |
A high-churn strategy creates more short-term gains, so a PMS with lower turnover can be worth more after tax even with similar headline returns. Surcharge and 4% cess apply on top. Speak to a chartered accountant for your own situation.
Key SEBI rules that protect you
- Only SEBI-registered portfolio managers (registration numbers start with INP) may offer PMS.
- Minimum investment of ₹50 lakh. Partial withdrawals are allowed only if the portfolio stays above ₹50 lakh.
- No upfront fees; exit loads capped at 3% / 2% / 1% in years 1–3.
- Performance fees only above a high-water mark.
- Client assets must be held with an independent custodian.
- Mutual fund investments inside a PMS must use direct plans.
- A direct onboarding option without a distributor must be offered.
- Performance must be reported on a time-weighted (TWRR) basis against a benchmark, so strategies can be compared fairly.
- A Disclosure Document must spell out the strategy, fees, risks, performance and conflicts of interest.
What changes with the Portfolio Managers Regulations, 2026
SEBI notified new Portfolio Managers Regulations on 7 October 2026. They replace the 2020 rules and take effect on 1 April 2027. The headline points so far:
- The ₹50 lakh minimum stays for regular PMS.
- Accredited investors are exempt from the minimum, subject to disclosures and agreed terms.
- A new route lets managers who invest only in mutual funds accept clients from ₹25 lakh, with a lower net-worth requirement for those managers.
- The ban on upfront fees continues.
Who should consider PMS, and who shouldn't
Consider it if…
You have well over ₹50 lakh to invest in equity on top of an emergency fund and core holdings, a 5+ year horizon, and you want a concentrated or customised portfolio you can see stock by stock.
Think twice if…
₹50 lakh is most of your investable wealth, you may need the money within 3 years, or you mainly want market returns: a low-cost index fund does that for a fraction of the fee.
Good fits
Business owners and senior professionals, people who already hold a large stock portfolio and want it run professionally, and investors who need specific exclusions (for example, no tobacco or no group companies).
How to invest in a PMS: step by step
- Shortlist strategies by approach (large-cap, multi-cap, small-cap, debt) and compare 3-, 5- and 7-year TWRR returns against the benchmark, after fees.
- Verify registration on SEBI's list of registered portfolio managers.
- Read the Disclosure Document: fees, exit loads, the fund manager's track record, the largest drawdown and related-party dealings.
- Choose direct or via a distributor. Direct onboarding avoids distribution commission.
- Complete KYC and sign the PMS agreement. A demat and bank account are opened or linked in your name.
- Fund the account with at least ₹50 lakh in cash, or transfer in existing shares and mutual funds of that value.
- Monitor the monthly statements and annual audit report, and review performance against the benchmark at least once a year.
Risks to understand
- Concentration: 15–30 stocks can fall much harder than a diversified fund.
- Manager risk: results depend heavily on one team; a manager change can alter the strategy.
- Cost drag: 2%+ a year compounds against you over long periods.
- Tax drag: frequent trading creates short-term gains taxed every year.
- Smaller-company liquidity: mid- and small-cap strategies can be hard to exit in a falling market.
Frequently asked questions
What is the minimum investment for PMS in India?
₹50 lakh per client, in cash or as securities you transfer in. SEBI's new Portfolio Managers Regulations, 2026 keep ₹50 lakh for regular PMS. From 1 April 2027 they add a separate route for managers that invest only in mutual funds, with a ₹25 lakh minimum, and they exempt accredited investors from the minimum.
Is PMS better than mutual funds?
Not automatically. PMS gives you a concentrated, customisable portfolio held in your own demat account, but it costs more, needs ₹50 lakh and every trade is taxed in your hands. Many PMS strategies have not beaten comparable low-cost index funds after fees, so compare post-fee, post-tax returns over 5+ years before switching.
Does PMS have a lock-in period?
No. SEBI does not allow portfolio managers to impose a lock-in. They may charge an exit load, capped at 3% of the amount redeemed in year one, 2% in year two and 1% in year three, with nothing after three years.
How are PMS returns taxed?
The shares and bonds sit in your own demat account, so every sale inside the portfolio is a capital-gains event for you. Listed equity held up to 12 months is taxed at 20% (STCG); held longer, gains above ₹1.25 lakh a year are taxed at 12.5% (LTCG). Dividends are taxed at your slab rate. PMS management and performance fees are generally not deductible from capital gains. Check with your CA.
How do I check if a PMS is genuine?
Confirm the portfolio manager's SEBI registration number (it starts with INP) on the SEBI website's list of registered portfolio managers, read its Disclosure Document, and compare its reported performance. PMS returns must be reported on a time-weighted (TWRR) basis against a benchmark, which makes comparisons fairer.
Can I invest in PMS directly without a distributor?
Yes. SEBI requires portfolio managers to offer a direct onboarding option, where you sign up without a distributor and no distribution commission is built into your fees.
Related guides
Last updated 30 October 2026. Educational content only, not investment advice. Figures reflect SEBI rules and the Income-tax Act as of this date; verify with the portfolio manager's Disclosure Document and your tax adviser.