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The Union Budget 2024-2025 has introduced significant changes to the capital gain tax. The budget has increased the STCG rate from 15% to 20% and the LTCG rate from 10% to 12.5% in equity.
While these changes will affect all capital market products like mutual funds and AIFs, the implication is substantial in equity PMS. Since PMS managers buy and sell stocks directly from clients account, it would impact the portfolio especially in case of short term calls.
An MFD requesting anonymity said that he has stopped recommending PMS post the introduction of capital gains tax in FY 2018. He said, “While I manage over Rs.200 crore in PMS, I feel that capital gains tax in PMS has made it less attractive. I only recommend PMS when a client insists for it.”
Deepak Jaggi, Co-Founder and MD, Satco Wealth, asserts that PMS will always remain attractive due to their concentrated portfolio style. He said, "A PMS fund manager typically selects only 15 to 25 stocks, creating a focused portfolio. The primary goal of the portfolio manager is to generate good returns for his clients, which is why the investment strategy is long term oriented. Even if the fund manager occasionally makes short-term transactions involving one or two stocks, it won't significantly impact the client's overall portfolio."
Vijay Choudhary, Director, Renaissance Investment Managers believes that PMS will always be attractive option compared to mutual funds and AIFs. He said, "PMS will continue to attract clients due to its significant performance and alpha generation capabilities. Additionally, only HNIs and ultra HNIs invest in PMS and taxation does not impact their investing decisions.”
Considering the popularity of PMS, Cafemutual is holding CafeAlt Conference on August 23, 2024 at the Taj Santacruz in Mumbai.
The event will provide insights on opportunities in the distribution of AIF and PMS, emerging trends in alternates space and GIFT City and more.
Click here to register now