PMS Costs for NRIs
There are various types of fees you will have to bear while investing in PMS as an NRI.
| Fee type |
Typical range |
Notes |
| Management fee |
1.5%-2.5% per annum |
Charged on AUM irrespective of their performance |
| Performance fee |
10%-20% of profits above the hurdle rate |
Usually applies only beyond a hurdle, generally 8-10% |
| Hybrid (fixed + performance) |
Lower fixed fee + 10-20% of outperformance |
Most common structure in India |
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Management Fee
A PMS management fee is what your provider charges to manage your portfolio, regardless of returns. It typically ranges from 1.5% to 2.5% per year.
-
Performance Fee
A performance fee is charged by a PMS provider if your portfolio earns a profit above a certain threshold, known as the Hurdle Rate. The performance fee for PMS can range from 10% to 20%.
Moreover, if your portfolio falls and later recovers to a previous peak, the manager can't charge performance fees on that recovery.
Apart from the costs listed above, some other small costs that are usually ignored are listed below:
- Custodian and demat charges: Levied for safekeeping your securities
- Brokerage charges: Charges levied by the in-house brokerage assigned by your PMS provider.
- Exit load: Generally between 1-3% if you exit from PMS within the first year.
- GST: A Goods and Services Tax of 18% is applicable on the management and performance fees related to your PMS.
PMS Taxation for NRIs
PMS taxation for NIRs includes capital gain taxes like STCG and LTCG on listed equities.The amount of short term and long term capital gain taxes levied on PMS income is given in the table below:
| Holding Period |
Tax Type |
Tax Rate |
| Up to 12 months |
Short Term Capital Gains |
20% + surcharge and cess |
| More than 12 months |
Long Term Capital Gains |
12.5% on gains above ₹1.25 lakh/year |
Returns on Portfolio Management Service
Your PMS returns can vary widely by strategy and market conditions; there is no fixed number.
The PMS returns an annual CAGR of 12% to 25% over a period of 3-5 years.
- Checking one-year returns in PMS is not helpful, as it generally does not capture the full picture.
- PMS returns should be compared with the benchmarks like NIFTY 50 for a better idea.
Example:
Let’s understand the real returns a PMS may give after accounting for all the costs with a hypothetical example.
Suppose you invest ₹1 crore in a PMS and earn a 18% CAGR in a year.
Here is the breakdown of all the costs you will have to bear before the money goes in your pocket:
| Costs |
Amount |
| Gross gain (18% on ₹1 crore) |
₹18,00,000 |
| Less fixed fee (2% of portfolio value) |
₹2,00,000 |
| Less performance fee (15% of gain above 10% hurdle, i.e., 15% of ₹8 lakh) |
₹1,20,000 |
| Less custodian/brokerage/GST (0.7%) |
₹70,000 |
| Net gain before tax |
₹14,10,000 |
| Less LTCG/STCG tax (approx. 12.5–20%, depending on holding period) |
₹1,76,000 to ₹2,82,000 |
| Net gain after tax |
₹11,30,000–₹12,30,000 |
So after accounting for all the possible deductions, a 18% profit becomes roughly 11.3-12.3% in a PMS.
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