Management Fee – PMS/AIF Cat-II and SmallCase subscriptions: Can the management/subscription fees be deducted while arriving at capital gains for PMS, AIF CAT2 and SMALL CASES? If yes, how to split the fee between LTCG and STCG—equally, or in proportion to LTCG vs STCG gains? Any references to applicable sections and a practical approach for reporting in ITR would be very helpful.
Dear Sir,
Under Section 48 of the Income-tax Act, only expenses directly connected to the transfer of securities can be deducted.
PMS/AIF/Smallcase management or subscription fees are generally not deductible while computing LTCG or STCG.
Thanks & Regards,
Payal Chhajed
Only cost actually paid to acquire such capital asset is allowed (Section 55 of Income tax Act,1961)
For detailed discussion you may opt for phone consultation
Hi please find below answer
a) PMS Fees - Can be claimed subject to its linked with the transaction entered and availability of agreement / certificate from the PMS (Its advisable to obtain) for the claim against capital gain income on proportionate basis
there are legal judgements on both the side - allowing it / disallowing it but i strongly believe that it should be allowed and it can be well contested
IN ITR show it under Schedule CG — individual scrip-level transactions for claim - LTCG / STCG as per direct apporpriation to respective script
b) AIF - Cat - II Fees
Can not be claimed as after netting of such fees net of profit distrbution is only taxed in the hands of recipient and therefore tax effect is already considered while offerting it net income only in ITR
IN ITR show it under CG as per gross pass through amount received
c) Small Case Subscription Fees
Not allowable since its advisory fees which can not be claimed or break script wise at the time of claim and therefore can not be adjusted against capital gain income generated
Management / subscription fees of PMS, AIF Cat II or Smallcase are generally not allowable as deduction from LTCG/STCG under Section 48, as they are not expenses incurred wholly and exclusively in connection with transfer, nor cost of acquisition under Section 55.
Hence, no question of splitting such fees between LTCG and STCG arises.
For ITR purposes, report capital gains as per broker / PMS / AIF statement, and in case of AIF Cat II, rely on Form 64D / fund tax statement.
For detailed discussion or advice opt for a phone consultation anytime.
Happy to help further! 😊
