For Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) looking to optimize their investment portfolios, Portfolio Management Services (PMS) presents a customized tailored, and professional approach. PMS offers personalized investment strategies managed by experts to align with individual financial goals and risk appetites. Find out all you need to know about PMS for NRI, its benefits, how to invest in PMS for NRI, taxation, charges, and factors to consider before investing.
What is PMS for NRI?
Portfolio Management Services (PMS) is a customized investment approach designed to provide professional management of portfolios, enabling NRI investors to achieve their financial goals. These services involve investing funds into a diverse range of individual securities, such as stocks, fixed incomes, debt, and cash to achieve those goals. Under PMS, seasoned professionals with highly credible management skills manage your investment portfolio. PMS for NRI offers a structured way of investing money and is a very effective medium for higher returns. Think of it as having a dedicated investment team working tirelessly for your financial goals.
Can NRI invest in PMS India?
There are two ways NRI can invest in PMS India: a Portfolio Management Scheme(PIS) account or directly opening a PMS account with a PMS service partner and using your NRO/NRE Bank account. Here are the details of both of them:
1. Invest in PMS India via the Portfolio Investment Scheme (PIS)
- Non-resident Indians or NRIs can invest in the PMS scheme by opening a Portfolio Investment Scheme (PIS)* Account as required under the RBI guidelines. You must visit the designated bank branch in India or send the required documents to that branch in India or to third-party providers via courier to open the PIS Account.
- You need the following 3 accounts to invest in PMS:
- A PIS Bank Account (a normal bank account where your money resides),
- A Trading Account (a share broker account which allows you to trade in equity, F&O etc. segments) and,
- A Demat account (it holds the equity shares purchased by you)
Note: The rights to all these accounts will be with the Portfolio Manager (person responsible for handling your account)
2. Invest in PMS for NRI via SBNRI
NRIs can invest in top PMS accounts easily with SBNRI’s Portfolio Management Services via your NRO/NRE Bank Account. You can connect with NRI PMS experts and understand all the intricacies of PMS account opening from this below button.
Is PMS different than Mutual Funds?
Yes, Portfolio Management Services (PMS) differ significantly from Mutual Funds despite both being investment vehicles. While mutual funds pool money from multiple investors to invest in a diversified portfolio of securities managed by a professional fund manager, PMS offers a more personalized approach tailored to individual investors. PMS provides direct ownership of securities, allowing investors greater control and customization over their portfolios compared to the pooled structure of mutual funds.
Additionally, PMS typically caters to high-net-worth individuals (HNIs), offering tailored investment strategies, active portfolio management, and greater flexibility in asset allocation compared to mutual funds, which are more standardized and accessible to a broader investor base. Furthermore, while mutual funds are regulated by market regulators like SEBI (Securities and Exchange Board of India), PMS operates under separate regulations, often providing more flexibility and sophistication in investment strategies, but with higher entry barriers and costs.
Also read: Which is the better option for NRI: PMS or mutual funds?
Benefits of PMS for NRI
For NRIs, PMS offers several advantages over mutual funds to suit their financial needs and achieve their goals. Here are a few benefits of investing in PMS for NRIs:
- Customized Solutions: PMS providers offer personalized investment strategies to accommodate specific financial goals and risk profiles, catering to the diverse needs of NRIs.
- Expert Management: Skilled portfolio managers oversee investments, leveraging their expertise and market insights to optimize portfolio performance and mitigate risks.
- Diversification: PMS portfolios are diversified across asset classes, sectors, and geographies, enhancing risk-adjusted returns and reducing vulnerability to market fluctuations.
- Transparency and Reporting: PMS providers furnish regular reports and updates, ensuring transparency and enabling clients to track portfolio performance and make informed decisions.
- Regulatory Compliance: Reputable PMS providers adhere to regulatory standards, providing NRIs with assurance regarding the legality and compliance of their investments.
Also read: AIF vs PMS: What is the Difference?
What to Consider Before Investing in PMS for NRI?
Before investing in PMS, NRIs should consider the following factors:
- Eligibility and Documentation: Ensure compliance with regulatory requirements and submit necessary documents, such as KYC (Know Your Customer) and FATCA (Foreign Account Tax Compliance Act) forms, to initiate PMS.
- Risk Assessment: Assess individual risk tolerance, investment objectives, and liquidity needs to align with the investment strategy proposed by the PMS provider.
- Fee Structure: Understand the fee structure, including management fees, performance-based charges, and other applicable expenses, to evaluate the cost-effectiveness of PMS relative to potential returns.
- Reputation and Track Record: Conduct due diligence on PMS providers, considering their reputation, track record, investment philosophy, and client testimonials to ensure compatibility with personal preferences and objectives.
Documents required to open PMS for NRIs
Here are the documents required for NRIs to open a PMS account in India:
- Copy of valid passport (pages with your name, address, date of birth, date and place of issue, expiry date, photograph, address, signature)
- Proof of NRI status (by way of valid Employment/Residence Visa copy or Work/Residence Permit)
- Copy of Indian PAN card
- Proof of Overseas and Indian Address
- Recent passport-size colour photograph
Also read: Best PMS Services for NRIs in India: Updated List 2024
What is the minimum investment amount in PMS for NRIs?
The minimum investment amount in PMS for NRIs is Rs. 50 Lakhs (5 Million). SEBI regulations mandate that a Portfolio Management Services account should be opened with a minimum investment ticket of Rs 50 lakhs.
Taxation on PMS for NRIs
The wealth management firm handling your PMS account will deduct the relevant taxes as Tax deducted at Source (TDS) and pay the net earnings to the investor. They also provide tax statements to help facilitate the tax filing process for NRIs. They can claim a TDS refund on the paid taxes during the filing of the Income Tax Return (ITR). It is advised that NRIs, even with a total income of less than Rs 2.5 lakhs for the assessment year file their ITR to claim the TDS refund.
Also read: How is PMS taxed for NRIs?
What are the charges of PMS?
Every Portfolio Management Service Scheme has certain Fund Management charges that may vary up to 2.50%* of the investment amount depending upon the PMS provider chosen for investments.
Also read: What are the charges of PMS services?
Wrapping Up
Portfolio Management Services (PMS) offer NRIs a customized investment solution suitable to their unique financial circumstances and objectives. By having a dedicated professional portfolio manager or wealth firm leverage their expertise, NRIs can optimize their investment portfolios, enhance diversification, and tap into the growing Indian market.
How to Invest in PMS for NRIs?
NRIs can now download the SBNRI App and choose to invest in different NRI PMS schemes in India with ease. You can also get detailed advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.
FAQs
Can NRI invest in PMS India?
- Yes, NRIs can invest in PMS India via there NRO/NRE Bank Account. NRIs can now download the SBNRI App and choose to invest in different NRI PMS schemes in India with ease. You can also get detailed advice from experts at SBNRI.
Who can avail PMS services?
- Portfolio Management Services are suitable for NRIs and OCIs looking to optimize their investment portfolios. Since PMS has a minimum ticket size of Rs 50 lakhs, High Net-worth Individuals (HNIs) can avail PMS services and have a personalised investment plan to meet their financial goals managed by expert professional portfolio managers.
How is NRI taxed in PMS?
- The wealth management firm handling your PMS account will deduct the relevant taxes as Tax deducted at Source (TDS) and pay the net earnings to the investor. NRIs can claim a TDS refund on the paid taxes during the filing of the Income Tax Return (ITR). It is advised that NRIs, even with a total income of less than Rs 2.5 lakhs for the assessment year file their ITR to claim the TDS refund.
How much money is required for PMS?
- The minimum investment amount in PMS for NRIs is Rs. 50 Lakhs (5 Million). SEBI regulations mandate that a Portfolio Management Services account should be opened with a minimum investment ticket of Rs 50 lakhs.
What are the risks and returns of investing in PMS?
- The risks and returns of investing in PMS depend on various factors such as the category, strategy, theme and style of the portfolio, the market conditions, the performance of the individual securities, the fees and charges involved, etc. Generally speaking, higher returns come with higher risks and vice versa. Therefore, you should choose a portfolio that matches your risk appetite and return expectations
Can NRIs invest in PMS through NRE or NRO accounts?
- Yes, NRIs can invest in PMS through either NRE or NRO accounts. However, there are some differences between them:
- NRE account: This account allows you to invest in PMS on a repatriation basis, which means you can transfer your earnings abroad without any restrictions. However, you need to convert your foreign currency into Indian rupees before investing.
- NRO account: This account allows you to invest in PMS on a non-repatriation basis, which means you cannot transfer your earnings abroad without prior approval from RBI. However, you can use your existing Indian rupees or foreign currency remitted from abroad for investing.
What are the benefits of PMS?
- PMS is designed for NRIs to provide exposure to professionally managed funds to help them achieve financial goals. Under PMS, the professional portfolio manager invests funds into a diverse range of securities, such as stocks, fixed incomes, debt, and cash. Here are 5 benefits of it:
- Personalized Investment Strategy
- Skilled Portfolio Manager
- Diversified Investment
- Regular Reports
- SEBI Regulated Product
Which PMS gives the highest return?
- You can find the Best PMS Services for NRIs in India: Updated List 2024 in this blog.
Is PMS better than MF?
- PMS typically caters to high-net-worth individuals (HNIs), offering tailored investment strategies, active portfolio management, and greater flexibility in asset allocation compared to mutual funds. It provides direct ownership of securities, allowing investors greater control and customization over their portfolios compared to the pooled structure of mutual funds.
How do I choose a good PMS?
- Here are 5 things you need to consider to choose a good PMS:
- Eligibility and Documentation: Ensure regulatory compliance and submit all necessary documents, such as KYC and FATCA.
- Risk Assessment: Assess your risk tolerance as PMS has a high ticket size of minimum Rs 50 lakh investment.
- Financial Goals: Make sure that PMS plan aligns with your financial goals and requirements.
- Fee Structure: Understand the fee structure, including management fees, performance-based charges, and other expenses.
- Due Diligence: Conduct due diligence on PMS providers, considering their reputation, track record, investment philosophy, and client testimonials.
Is PMS regulated by SEBI?
- Yes, PMS is regulated by SEBI (Securities and Exchange Board of India), which is the market regulator in India. SEBI has issued guidelines and regulations for PMS service providers, portfolio managers, stock brokers, depository participants and investors. SEBI also monitors and supervises the activities of PMS and takes action against any violations or malpractices.
What is the lock-in period for PMS?
- The lock-in period for PMS is the minimum period that you have to stay invested in the portfolio before you can exit from it. The lock-in period varies depending on the service provider and the category of PMS. Generally, it ranges from 1 year to 3 years. If you exit from PMS before the lock-in period, you may have to pay an exit load or penalty. You should check the lock-in period and exit terms before investing in PMS.
Is it possible to withdraw some money from my PMS account?
- Yes, you can withdraw some money from your PMS account subject to certain conditions such as:
- The withdrawal amount should not be less than Rs. 5 lakhs or 10% of the portfolio value, whichever is higher.
- The withdrawal should not reduce the portfolio value below the minimum investment amount of Rs. 50 lakhs.
- The withdrawal should be made after giving a notice period of 15 days to the service provider.
- The withdrawal should be in proportion to the securities held in the portfolio.
