Entities which can invest in PMS

Individuals (including NRIs) are the most common PMS investors. SEBI permits a natural person to open a PMS account provided the person satisfies the minimum investment amount and completes the prescribed KYC formalities.

Hindu Undivided Families (HUFs), trusts, and charitable societies are also eligible. These entities must be registered under the Indian law, possess a valid PAN and meet the same financial thresholds as individuals.

Companies, LLPs, and other corporate bodies can invest in PMS, but they face higher minimum investment limits. The entity must be incorporated in India, have a valid corporate PAN, and the authorised signatory must complete KYC on behalf of the company.

All eligible entities must be classified as “high net‑worth investors” (HNIs) as defined by SEBI. The classification ensures that PMS, which are discretionary and fee‑based, are offered only to investors capable of bearing higher risk and larger investment sizes.

• Eligibility is determined by the investor’s legal status, net worth and compliance with SEBI’s PMS guidelines.
• Distributors must verify eligibility before onboarding any client.

For individuals and NRIs, the primary criterion is the minimum investment of INR 50 lakh. In addition, the investor must possess a PAN, Aadhaar (or passport for NRIs), and a recent address proof. The investor’s net worth should be at least INR 2 crore, as per SEBI’s definition of HNI.

HUFs and trusts follow the same INR 50 lakh floor, but they must also submit the HUF deed or trust deed, respectively, along with the PAN of the entity. The Karta of an HUF or the trustee must complete personal KYC on behalf of the entity.

Companies, LLPs and other corporate bodies have a higher floor of INR 5 crore. Required documents include the certificate of incorporation, PAN of the company, board resolution authorising the investment, and KYC of the authorised signatory. The company’s net worth must be at least INR 10 crore.

All categories must also comply with SEBI’s anti‑money‑laundering (AML) norms, which include declaration of source of funds and periodic reporting.

SEBI’s PMS guidelines prescribe a tiered minimum investment structure. The base floor is INR 50 lakh for natural persons and HUFs. This amount ensures that the investor can comfortably absorb the discretionary nature of PMS strategies.

For trusts and charitable societies, the floor is INR 1 crore because these entities often manage pooled funds on behalf of multiple beneficiaries, increasing the systemic risk profile.

Corporate entities, including listed and unlisted companies, must invest at least INR 5 crore. The higher threshold reflects the larger capital base of corporations and the need for robust risk‑management frameworks.

Distributors must verify the amount before onboarding. If an investor’s declared capital falls short, the distributor must either reject the PMS onboarding or suggest a different investment avenue such as mutual funds.

Know Your Customer (KYC) is mandatory for every PMS investor irrespective of the entity type. The process begins with collection of identity proof (PAN, Aadhaar or passport), address proof (utility bill, bank statement) and, where applicable, entity‑specific documents such as deeds or incorporation certificates.

SEBI mandates that the distributor obtain a signed KYC declaration form, verify the documents in person or through a video‑KYC, and retain the records for a minimum of five years. For corporate investors, a board resolution authorising the PMS investment must be uploaded and verified.

Anti‑Money‑Laundering (AML) checks require the source of funds to be disclosed. The distributor must obtain a self‑declaration of the source of wealth and may be required to file a Suspicious Transaction Report (STR) if any red flags arise.

Failure to complete KYC correctly leads to rejection of the PMS account and can attract penalties for the distributor under SEBI regulations.

SEBI limits PMS to HNI investors only. The net‑worth criterion (minimum INR 2 crore) and the investment floor together act as a filter. However, certain exemptions exist for family offices and sovereign wealth funds, which may operate under separate guidelines.

From a tax perspective, PMS returns are treated as capital gains. Short‑term capital gains (STCG) on securities held for less than 12 months are taxed at 15%, while long‑term capital gains (LTCG) exceeding INR 1 lakh in a financial year are taxed at 10% without indexation. Dividends received from PMS portfolios are taxable in the hands of the investor as per the applicable slab rates.

Distributors must disclose the tax implications to the investor during onboarding. They should also ensure that the PMS agreement contains a clause on tax reporting and that the investor receives Form 26AS reflecting the tax deducted at source (TDS), if any.

The distributor acts as the first line of defence in verifying investor eligibility. This includes confirming the entity type, checking net‑worth, and ensuring the minimum investment amount is met.

During onboarding, the distributor must collect and verify all KYC documents, perform AML checks, and retain records as per SEBI’s five‑year retention rule. The distributor also has to disclose all fees, tax implications and the risk‑profile of the PMS strategy.

Post‑onboarding, the distributor monitors any changes in the investor’s status (e.g., change in net worth, change of authorised signatory) and updates the PMS manager accordingly. Non‑compliance can attract penalties for both the distributor and the PMS provider.

All PMS investors must be classified as high net‑worth individuals or entities, meeting both net‑worth and minimum‑investment thresholds. The distributor is responsible for thorough KYC, AML verification and document retention.

Specific entity types have distinct documentation: individuals need PAN and Aadhaar, HUFs require a deed, trusts need a trust deed, and companies must provide incorporation certificates and board resolutions.

SEBI’s regulatory framework imposes a tiered minimum investment (INR 50 lakh for individuals/HUFs, INR 1 crore for trusts, INR 5 crore for corporates). Tax treatment follows capital‑gain rules, and distributors must communicate these implications clearly.