PMS & AIF taxes, with a worked example.
Tax decides how much of a return actually reaches you. Here is exactly how capital-gains tax is worked out on a ₹1 crore portfolio, why holding period matters so much, and how AIF taxation differs by category.
Every sale is your tax event.
Because PMS shares sit in your own demat, there is no fund wrapper to defer anything: every sale the manager makes is taxed in your hands, in the year it happens, whether or not you withdraw a rupee. Rates current to FY 2025-26 (for sales from 23 July 2024; STCG was 15% before that): 20% short-term, 12.5% long-term above the ₹1.25 lakh annual exemption, plus 4% cess.
AIFs: the category decides who pays.
A PMS is always taxed in your hands. For AIFs, pick a row; the category decides whether the tax lands with you or inside the fund.
Every sale the manager makes is taxed in your hands, in the year it happens, whether or not you withdraw a rupee: 20% short-term, 12.5% long-term above the ₹1.25 lakh annual exemption, plus 4% cess.
Every sale the manager makes is taxed in your hands, in the year it happens, whether or not you withdraw a rupee: 20% short-term, 12.5% long-term above the ₹1.25 lakh annual exemption, plus 4% cess.
A ₹1 crore year, taxed line by line.
Say the manager books ₹5 lakh of short-term gains and ₹8 lakh of long-term gains in one year. Only ₹6.75 lakh of the long-term gain is taxable; the first ₹1.25 lakh is exempt. Here is the full bill.
| Line | How it's worked | Tax |
|---|---|---|
| Short-term gains (STCG) | ₹5,00,000 held ≤ 12 months · 20% | −₹1,00,000 |
| Long-term gains (LTCG) | ₹8,00,000 − ₹1.25 L exemption = ₹6,75,000 · 12.5% | −₹84,375 |
| Subtotal | On ₹13,00,000 of booked gains | ₹1,84,375 |
| Health & education cess | 4% of the tax | −₹7,375 |
| Total tax for the year | ≈ 14.8% effective on ₹13 L of gains | ₹1,91,750 |
The liability lands whether or not you withdraw. Surcharge may apply at higher incomes. Rates apply to sales from 23 July 2024 onward.
Same gains. ₹1.18 lakh apart.
The identical ₹13 lakh of booked gains attracts very different tax depending purely on how long positions were held. A high-churn strategy carries a hidden tax cost. When you compare managers, turnover matters as much as the headline return. The bars are to scale.
Three things to settle on tax.
- 01Ask for the strategy's recent portfolio-turnover figures; higher churn usually means more short-term tax
- 02Expect an annual capital-gains statement from the manager; keep it for your filings
- 03Your residency, income slab and other gains change the final number; confirm with your CA
Nyra has already read every factsheet.
Every SEBI-registered strategy, scored on the same 0–10 basis, with every answer citing its source. Ask her where each structure (PMS, AIF or GIFT City) fits before you shortlist.
PMS & AIF tax, answered.
Keep reading.
Weigh fees and tax together, then confirm with your CA.
Illustrative, not tax advice. Figures are current to FY 2025-26 and may change; your residency, slab and other gains decide the final number; verify with a qualified adviser. PMS, AIF & GIFT City investments are subject to market risks.