Which is the better option for NRI: PMS or mutual funds?
PMS or Mutual Funds
We receive a lot of queries from many NRI investors who struggle between PMS and mutual funds. With so many investment options to choose from, it is very confusing to select the right investment option for most individual investors. For example, there are many ways to invest in equities – direct investment in stocks, through portfolio management service (PMS), mutual funds, etc.
There are striking similarities; investments through MF and PMS involve active fund management by professional fund managers. However, there are several differences between them, such as minimum investment portfolio, charges, etc.
PMS vs Mutual Funds
|Objective||Professional Services offered to meet investor specific investment objectives|
Structured to meet fund stated investment objectives
|Investors||Mutual Fund Trustees (Investors only allocated units)|
|Minimum Investment Portfolio||Rs. 50 Lakhs|
|Portfolio Construction||15-25 stocks|
More than 50 stocks
Portfolio Stock Weightage
|Flexible||Limited to 10%|
|Reach||Limited no. of Investors|
Wide no. of Investors
|2% – 3% of portfolio annually|
Up to 2.25%*
Summary: For NRIs with a higher investment budget (more than 50 Lakhs), PMS will ensure higher returns and more flexible investments and for NRIs with a restricted budget (minimum investment at Rs.500/-), Mutual Funds will be the better option.
Here is a list of the Best PMS providers for NRI in India:
- Motilal Oswal PMS
- Kotak PMS
- ICICI Prudential PMS
- Birla Sunlife PMS
- Alchemy PMS
- Ask PMS
- Invesco PMS
- Unifi capital PMS
- IIFL PMS
- NJ Advisory PMS
PMS Taxation for NRI
The taxes applicable for NRI investors in PMS services are deducted at source (TDS) by the brokerage firm and net profits are paid. The portfolio Managers (people responsible for handling your account) help you with the filing of your taxes by providing the tax statements at the end of the year. They also keep the entire process of investments transparent and will not sell or invest anywhere without letting you know.
Even if the capital gain in India is below Rs. 2,50,000/-, an NRI should file a tax return to claim a refund of the taxes deducted at source.
Here is a list of Mutual Fund Houses that accept investments from US:
- DHFL Pramerica Mutual Fund
- Birla Sun Life Mutual Fund
- ICICI Prudential Mutual Fund
- SBI Mutual Fund
- UTI Mutual Fund
- L&T Mutual Fund
- PPFAS Mutual Fund (Parag Parikh Financial Advisory Services)
- Sundaram Mutual Fund
Different types of Mutual Funds are taxed differently:
*(Equity Funds: An equity fund is a mutual fund that invests principally in stocks)
*(Debt Funds: A debt fund is a mutual fund that invests in fixed-interest generating securities such as corporate bonds, government securities)
Nature of Profits / Income
|Equity Funds*||Debt Funds*|
|Minimum Holding period for Long term capital gains||1 year|
Short term capital gains taxation
|15% + cess + surcharge||As per the tax rate of the investor|
|Long term capital gains taxation||10% + cess + surcharge (if the long term gain exceeds Rs 1 Lakh)|
(long term gains up to Rs 1 Lakh is tax-free)
20% + cess + surcharge
*(Cess: A cess is a tax on tax that you pay to the government for purposes set by the government. The cess is charged till the objective set by the government is fulfilled. Eg: Krishi Kalyan Cess, Swachh Bharat Cess etc.)
At SBNRI, there are investment experts for macros, equities, debt, reality structures products, etc., to advise clients how to diversify their portfolios effectively and reduce their risk in the process. For any queries related to PMS, contact us using the button below.