PMS Fee Structure in India: What SEBI Allows, Caps and Bans

Most articles on PMS fees start with percentages. This one starts with the rules, because the rules decide which percentages can be charged at all. A mutual fund's total expense ratio has a SEBI ceiling. A PMS fee structure is different. It is a private contract between you and the portfolio manager, and SEBI regulates the shape of that contract much more than its price.

The stakes are no longer small. SEBI's Chairman told the industry in September 2026 that portfolio managers' assets, excluding PF and EPFO money, had grown to about ₹9.2 lakh crore by August 2026, up from around ₹1.4 lakh crore at the end of FY16. More than 530 portfolio managers are now registered, and discretionary clients have grown from about 46,000 to around 2.2 lakh. At that scale, the rules around PMS fees decide what lakhs of investors actually pay.

This guide is not a rupee-by-rupee walk-through of a PMS bill. Our earlier step-by-step guide to PMS fees covers that. It answers a different question: what is a portfolio manager actually allowed to charge you, and how can you check it?

Today's PMS fee structure in India was built up over sixteen years, mostly in reaction to investor complaints.

Under the SEBI (Portfolio Managers) Regulations, 1993, PMS charges in India were set by the written agreement, with little guidance on how fees should be calculated. On 5 October 2010 SEBI issued a circular titled "Regulation of Fees and Charges". It said plainly that SEBI had been "receiving complaints from clients relating to fees and charges", and that fee clauses in agreements "do not always clearly reflect the fees and charges payable by the client and the manner of computation".

The 2010 circular introduced three ideas that still sit at the heart of the system:

• The performance fee must follow the high-water-mark principle over the life of the investment.
• All fees must be levied on the actual amount of assets under management.
• The agreement must carry a separate fee annexure that shows charges on a sample portfolio (then ₹10 lakh) in three scenarios, and the client must sign it.

It applied to fresh agreements from 1 November 2010.

By 2019 the industry had grown, and so had the fee creativity. A SEBI-appointed Working Group reported on 11 July 2019. It found that exit loads ranged "from 1% to 8% and for up to 5 years". It also found that, generally, "100% of the upfront fees / set up fees charged to the Client are paid as commission to the Distributor". The group described several versions of performance-fee "catch-up" clauses that investors did not properly understand. Its proposals were to cap operating expenses, standardise exit loads, pay distributors only through trail commission, and disclose fee ranges.

SEBI acted on most of these. The SEBI (Portfolio Managers) Regulations, 2020 were notified on 16 January 2020, and Regulation 22(11) banned upfront fees. A circular dated 13 February 2020, applicable from 1 May 2020, added a 0.50% cap on operating expenses, brokerage at actuals, a declining exit-load cap, direct on-boarding, and trail-only distributor commission.

The next stage was about making PMS fees understandable rather than adding new limits. A circular of 2 May 2024 required a fee calculation tool and multi-year fee illustrations for clients on-boarded from 1 October 2024. It also said no fee may be charged unless it appears in the signed annexure. SEBI then consolidated everything into the Master Circular for Portfolio Managers, which was updated on 16 July 2025. In September 2025 the disclosure document format was simplified. Finally, a consultation paper of 23 July 2026 led to Board approval of a new rulebook on 24 September 2026.

To understand a PMS fee structure, you need to know which document says what. There are four layers, and each one narrows the one above it.

1. The Regulations. The SEBI (Portfolio Managers) Regulations, 2020, last amended on 3 September 2025, set the legal boundaries. Regulation 22 lists what the client agreement and the disclosure document must contain, including the quantum and manner of fees for each activity. Regulation 22(11) defines the permitted fee types, and Regulation 22(12) requires the range of fees to be disclosed.
2. The Master Circular. The July 2025 Master Circular for Portfolio Managers holds the operating detail: the expense cap, brokerage treatment, the associate limit, high-water-mark mechanics, exit-load caps, the fee annexure format and the fee calculation tool.
3. The disclosure document. This is each manager's own public statement of its fees, risks, related-party dealings and performance. It must be given to you before you sign.
4. The client agreement and its fee annexure. This is the contract that binds you. Schedule IV of the Regulations lists its compulsory contents, including "Terms of Fees" and "Billing".

A fee that is legal under the Regulations can still only be charged to you if it appears in your signed annexure. That last layer is the one you control.

Regulation 22(11) is short. It says the portfolio manager "shall charge an agreed fee from the clients for rendering portfolio management services without guaranteeing or assuring, either directly or indirectly, any return and the fee so charged may be a fixed fee or a return based fee or a combination of both."

That sentence creates the three PMS fee structures you will see in every offer:

• Fixed fee: a percentage of assets under management, charged whatever the returns. This is what people usually mean by the PMS management fee.
• Return-based fee: a share of profits, usually above a hurdle and always subject to the high-water mark.
• Combination (hybrid): a smaller fixed fee plus a smaller profit share.

SEBI's investor FAQ on portfolio managers says the same thing in plainer words: the fee "may be a fixed amount or a performance-based fee or a combination of both." Notice what the sentence leaves out: it sets no ceiling on PMS fees. It also forbids any promise of returns, so a fee pitched alongside a "guaranteed" outcome breaks the rule. Hurdle rates and high-water marks deserve their own deep dives, so we only touch on them here.

The proviso to Regulation 22(11) reads: "no up-front fees shall be charged by the portfolio manager directly or in-directly to the clients." The Master Circular repeats it. This is the one fee type SEBI bans outright, and the ban covers indirect routes too, such as a "set-up" or "account opening" fee charged under another name.

The ban matters because the Working Group found that upfront fees were usually passed straight to distributors as commission, which rewarded selling over suitability. Some guides to PMS charges in India still list a 1–3% "entry load". Under the current Regulations, any upfront charge to the client is not allowed, whatever it is called.

Distributors are still paid, but the Master Circular says portfolio managers must "pay fees or commission to distributors only on trail-basis", and only "from the fees received by Portfolio Managers". Prospective clients must also be told the commission the distributor will earn. Every portfolio manager must offer direct on-boarding as well, and at the time of direct on-boarding "no charges except statutory charges shall be levied." The structural point is that commission now comes out of the manager's PMS fees rather than being added on top.

Your PMS charges are more than the PMS management fee. SEBI controls what can be added around it.

Under the Master Circular, "Operating expenses excluding brokerage, over and above the fees charged for Portfolio Management Service, shall not exceed 0.50% per annum of the client's average daily AUM." Custody, fund accounting, RTA and audit charges all fall inside this ceiling. The 2019 Working Group had suggested sub-limits too (10 bps for custody, 25 bps for audit and miscellaneous items), but the rule that was adopted is the single 0.50% cap.

There is one important clarification on the way. In the July 2026 consultation paper, SEBI proposed that the cap "shall be calculated exclusive of all statutory levies", and the Board approved "excluding statutory levies from the current operating expenses of 0.5% p.a." in September 2026. Taxes and government levies will no longer eat into the 0.50% headroom, but they are not waived either. They will show up as a separate line.

Brokerage is outside the 0.50% cap, but it must be charged "at actuals", meaning what the broker actually billed, with no mark-up. To stop managers routing business to their own group at inflated rates, the Master Circular caps transactions through self or associates at 20% by value per associate per service in a financial year. Associate rates cannot be higher than those paid to unrelated providers. Schedule IV also asks that any individual miscellaneous expense above 5% be shown separately in the agreement.

A PMS cannot lock you in, according to SEBI's FAQ, but it may charge an exit fee. The Master Circular caps it at a maximum of 3% of the amount redeemed in the first year, 2% in the second, 1% in the third and nil after three years. Large value accredited investors can negotiate different terms.

Two calculation bases are set by rule. First, "all fees and charges shall be levied on the actual amount of clients' assets under management", so a manager cannot charge on a notional or committed figure. Second, the 0.50% expense cap is measured against the client's average daily AUM, so expenses track the portfolio's real size through the year. Many managers compute the PMS management fee on average or daily AUM as well. The exact method (opening value, closing value or daily average) must be written in your agreement.

For return-based fees, the Master Circular sets two hard rules. Profit must be computed "on the basis of high water mark principle over the life of the investment". And "for the purpose of charging performance fee, the frequency shall not be less than quarterly", which means a manager cannot crystallise performance fees more often than once a quarter. The high-water mark applies to discretionary and non-discretionary services but not to advisory, and it is adjusted proportionately for interim additions and withdrawals. SEBI's own illustrations assume annual calculation, so check the period in your contract.

The Regulations do not fix a billing cycle for PMS fees. Instead, Schedule IV's "Billing" clause requires the agreement to state the "periodicity of billing, whether payment to be made in advance, manner of payment of fees, whether setting off against the account etc., type of documents evidencing receipt of payment of fees." In practice, most managers deduct fees from the portfolio's cash, which can mean selling securities. Your agreement must say so. The Master Circular's on-boarding checklist also expects "intimation regarding PMS fees and modes of payment or frequency of deduction" to be part of the account opening form.

The Regulations then close the loop. Regulation 31 requires a report at least once every three months that includes "expenses incurred in managing the portfolio", and the Master Circular adds a fee-calculation annexure to the quarterly report in a standard format.

The Master Circular's own template (Annexure 4A) shows how a combined structure is disclosed. It assumes a ₹50 lakh portfolio that gains 20% in a year, brokerage and transaction charges of 2%, a 2% management fee, and a 20% performance fee above a 10% hurdle, all calculated annually. The gross portfolio rises to ₹60 lakh. Brokerage (₹1 lakh), management fee (₹1 lakh) and performance fee (20% of the ₹5 lakh above the hurdle, so ₹1 lakh) add up to total charges of ₹3 lakh. The net value is ₹57 lakh, a 14.00% gain. The 2% brokerage figure is only the template's example. What matters is the format: every manager must show you this table for your own PMS fee structure.

GST is the line investors most often forget. SEBI's own disclosure document template, issued with the September 2025 disclosure document circular, states: "GST at the rate of 18% would be levied on fees if any, payable towards portfolio management fee." GST on PMS fees applies to the fixed fee and to any performance fee, so a 2% fixed fee effectively costs 2.36%.

Three points follow from the framework:

• GST is a statutory levy, not part of the manager's fee. It appears as a separate amount on the fee invoice or statement.
• Under the newly approved 2026 rules, statutory levies will be kept outside the 0.50% operating-expense cap, so the cap measures only the manager's own costs.
• Performance must be reported to you "net of all fees and all expenses (including taxes)", so headline track records already include fee and GST drag.

Whether PMS fees are deductible for income tax is a separate, disputed question. For GST on PMS fees, the rate printed in your disclosure document and on each invoice is the one that applies to you.

Before you sign, the manager must give you its PMS disclosure document. Under Regulation 22(4)(a) it must state "the quantum and manner of payment of fees payable by the client for each activity", and under Regulation 22(12) it must show the range of fees charged under various heads. The September 2025 format splits the document into static and dynamic sections. It lists the "nature of expenses": investment management and advisory fees, custodian fee, registrar and transfer agent fee, and brokerage and transaction costs. Changed pages must be certified and filed with SEBI within seven working days, and the latest document must always be on the manager's website.

One caution: SEBI's FAQ says it "does not certify the accuracy or adequacy of the contents of the Disclosure Document." The document is the manager's own statement, checked by an independent chartered accountant, not a regulator-approved fee sheet.

The agreement must carry a separate annexure listing every fee, with charges shown on a ₹50 lakh sample portfolio over one year in three scenarios: value up 20%, down 20%, and unchanged. Under SEBI's May 2024 transparency circular, for clients on-boarded from 1 October 2024 who pay a performance fee, it must also include one-year and multi-year illustrations that build in the high-water mark, in formats set by APMI with SEBI. All text must be at least size 11 font. You must sign the annexure separately and add a note, handwritten or typed in a digital process, confirming you understood the fee structure. Most importantly, "no additional fees and charges are levied, other than those specified in the annexure."

Every manager must provide a fee calculation tool that "highlights various fee options with multi-year fee calculations" and applies the high-water mark. New clients from 1 October 2024 must get the link in advance. After you invest, the quarterly report carries a fee-calculation annexure, so you can check each bill against the annexure you signed. If you and the manager disagree, the Master Circular sends fee disputes to arbitration, and Regulation 22A provides for mediation, conciliation and arbitration.

On 24 September 2026 the SEBI Board approved the SEBI (Portfolio Managers) Regulations, 2026 to replace the 2020 framework. The fee-relevant points in SEBI's press release on the Board meeting are:

• Statutory levies out of the 0.50% cap. The current operating-expense ceiling will exclude statutory levies.
• A capped fee route for mutual-fund portfolios (PRIM). A new Portfolio Managers Route for Investing in Mutual Fund units lets managers build portfolios from direct plans of mutual funds, ETFs, index funds and SIFs, with a ₹25 lakh minimum. The fixed management fee is capped at 1% of AUM, a performance-based fee is also allowed, and exit-load provisions are waived. The July 2026 consultation had proposed a 2.5% cap, so the final number is much tighter.
• Independent Fund Managers. Fees will be "paid directly to the registered portfolio manager", which keeps the fee trail with the regulated entity.
• A standardised Investment Management Agreement and digital disclosure documents. These should make fee clauses easier to compare across managers.

Two cautions. First, the press release does not change Regulation 22(11)'s basic menu. The draft regulations kept the fixed / return-based / combination wording and the upfront-fee ban. Second, as of 2 October 2026 SEBI's portfolio managers listing still shows the 2020 Regulations (amended to 3 September 2025) as the latest version, and news coverage of the approval gives no commencement date. Until the 2026 regulations are notified, the 2020 Regulations and the July 2025 Master Circular govern your PMS fees.

For all its gaps, the framework makes a PMS easier and safer to evaluate than it was a decade ago:

• A closed menu. Only fixed, return-based or combination fees are lawful, so anything else in a term sheet is a warning sign.
• No upfront bite. Your full capital goes to work on day one, and the old upfront-commission incentive has been closed off.
• Bounded extras. Operating costs are capped at 0.50% of average daily AUM, brokerage passes through at cost, and associate dealings are limited.
• No double charging on recoveries. The high-water mark means you pay a performance fee only on new highs.
• Everything in writing. The fee range is in the disclosure document, every charge is in a signed annexure, and anything outside the annexure is barred.
• Self-checking tools. A multi-year fee calculator before you invest and a fee-calculation annexure every quarter let you audit your own bill.

You don't need to trust a sales pitch. Put one manager's PMS disclosure document and fee annexure next to another's, check both against the same rules, and the differences in PMS charges become visible.

Rules only protect you if you apply them. That is the gap PMS Sahi Hai is built to close. It describes itself as India's first AI-powered PMS and AIF marketplace, and every check in this guide becomes faster when the fee terms of many strategies sit in one place.

Fee terms next to returns. On the PMS Sahi Hai compare tool, each strategy page shows its fixed fee, its performance fee and hurdle, and its exit-load schedule beside its net-of-fee CAGR, drawdown and benchmark. You can see in seconds whether a strategy charges fixed, return-based or a combination, which is the Regulation 22(11) question, and how two portfolio management services fee structure options differ before you open either disclosure document.

Nyra reads the documents for you. Nyra, the AI research analyst, matches investors from 900+ tracked offerings "by risk, fees & returns", and its portfolio review flags overlap, drift and fee drag. Nyra's published scoring methodology counts fee alignment inside its Structure and Stewardship pillar, so fees are part of the score rather than a footnote. If you already hold a PMS, the Nyra portfolio health check looks at "the full load: fixed, performance, and the hidden drag". Nyra is an analytical tool, not a SEBI-registered investment adviser, so treat its output as research to verify against the PMS disclosure document and your signed annexure.

Our own fees follow the same rules. The trail-only, written-disclosure principle that SEBI applies to distributors is also how PMS Sahi Hai is paid. The PMS Sahi Hai fee disclosure states that the firm is an APMI-registered distributor paid a trail by the asset manager, with ₹0 upfront commission and ₹0 advisory fee charged to you, and that the exact rate for each strategy is shared in writing before you invest.

Go deeper on the maths. For worked rupee examples of each model, read PMS Fees Explained: What You Pay, Step by Step. For the layers of GST, hurdle and catch-up, see what a PMS really costs. For whether active fees are worth paying at all, see our active vs passive PMS fees analysis.

The framework has honest limits that investors should understand:

• No price cap for a regular PMS. Neither Regulation 22(11) nor the Master Circular caps the PMS management fee or the profit share. Only the new PRIM route will carry a 1% fixed-fee cap. SEBI's investor guide to PMS is a useful neutral starting point, but it cannot tell you whether a price is fair.
• Hurdles and catch-ups are contractual. SEBI mandates the high-water mark but not a minimum hurdle. The Working Group itself flagged the many catch-up variants.
• Carve-outs. Large value accredited investors negotiate exit loads and are exempt from the standard agreement contents, and co-investment services sit outside the fee and exit-load provisions.
• The disclosure document is not regulator-certified. SEBI explicitly does not vouch for its accuracy.
• GST adds 18% to every fee, and investors often leave it out when comparing offers.
• Complexity remains. Average-AUM bases and proportionate high-water-mark adjustments are hard to verify without the tool and the quarterly annexure.

The PMS fee structure in India comes down to one principle. SEBI fixes the form, the disclosure and the outer limits, and leaves the price to you and the manager. Before you sign, check five things. Is the fee fixed, return-based or a combination? Is there any upfront charge in disguise? Are operating expenses within 0.50% of average daily AUM, with brokerage at actuals? Is the performance fee on a high-water-mark basis, charged no more than quarterly? Does the signed annexure, with GST shown separately, match what the disclosure document says? Then watch the 2026 regulations, which will change how statutory levies are counted and add a 1%-capped PRIM route once notified. PMS Sahi Hai and Nyra can do the first pass for you, putting each strategy's PMS fees and net-of-fee returns side by side, but the signed annexure is still the document that binds you.

You now know the rules every PMS fee structure has to follow. Take the next step: put two or three shortlisted strategies side by side on PMS Sahi Hai's compare page, check their PMS fees, hurdles and exit loads against this checklist, and ask Nyra to flag fee drag in any portfolio you already hold. Then read each PMS disclosure document and fee annexure, and ask for the fee calculator before you commit capital. For a human second opinion on a portfolio management services fee structure, book a private consultation with PMS Sahi Hai. There's no upfront fee, and every rupee we earn is disclosed in writing.