PMS Fees Explained: What You Pay, Step by Step

Portfolio managers in India charge investors in one of three ways, and most managers who offer more than one let the investor pick which applies to their account.

Most managers who offer a choice let you pick the model that fits your own risk comfort this isn't a decision the manager makes for you.

Whichever model applies, the fee itself is a taxable service under GST every fee line item, whether it's the fixed leg or the performance leg, gets an additional 18% added on top before it leaves your account, and this GST is not deductible against your capital gains tax later (IIFL Knowledge Center, "Tax Treatment for PMS"; TaxGuru, "Impact of GST on Asset Management Companies"). That's a real, compounding cost most fee comparisons leave out entirely — so we've built it into every table below.

Under a fixed-fee arrangement, the manager charges a set percentage on your average portfolio value for the period not the closing value, and not the opening value. This is charged whether your portfolio is up, flat, or down, because the fee is compensating for the manager's ongoing work of running your account, not for the returns it produces.

Worked example: ₹80,00,000 invested, 1.75% fixed fee

In plain English: the manager takes 1.75% of your average balance, adds 18% GST on that fee amount, and deducts both — every single year, whether your portfolio went up, stayed flat, or fell.

How the same 1.75% fee lands across all three market conditions:

Notice step 5 and 6 happen no matter what row you're in that's the defining trait of this model. In a flat year, you still lose 2.07% purely to fee and GST. In a loss year, the fee widens your loss further, from -18.0% to -19.88%.

There's no fixed leg here at all. The manager is paid a percentage of profit, but only on the slice of profit that clears the hurdle rate — the minimum return you're entitled to before any fee applies. Below the hurdle, or in a loss, you owe nothing beyond incidental charges.

Worked example: ₹80,00,000 invested, 18% profit-share, 9% hurdle rate

In plain English: you keep the first 9% of any gain entirely fee-free. The manager only gets paid on whatever profit you make above that 9% and if you don't clear 9%, or you lose money, the manager earns nothing that year.

Across all three market conditions:

Step 4 through 7 are the ones worth understanding: they only trigger if and only to the extent that your portfolio has actually cleared the hurdle first. In the flat and loss columns, the calculation stops at step 4 and nothing further is owed.

One protection worth knowing: once your portfolio sets a new high a high-water mark the manager can only charge a fresh performance fee once your portfolio clears that new peak plus the hurdle on top. This stops you from ever being charged twice for the same gain, and it's a SEBI-mandated protection built into every performance-fee PMS structure (Policybazaar, "High-Water Mark in Mutual Funds").

The hybrid model runs both mechanisms at once, but at reduced rates on each leg a smaller fixed fee than a fixed-only structure, plus a smaller profit-share than a profit-sharing-only structure.

Worked example: ₹80,00,000 invested, 1.0% fixed fee, 12% profit-share, 10% hurdle rate

In plain English: you pay a small fixed fee every year no matter what but it's lower than a fixed-only structure. On top of that, if your gains clear 10%, the manager takes a share of only the amount above that.

Across all three market conditions:

Compare the flat-year row here (-1.18%) against the fixed-only flat year above (-2.07%): the smaller fixed leg means a milder drag in a year the market doesn't move at all. That's the structural trade-off of a hybrid model a softer floor cost in exchange for giving up some upside in a strong year.

This is the part a single-line fee disclosure never shows you: "2% fixed" and "18% profit-share above 9% hurdle" aren't numbers you can compare directly. You have to run both through your actual expected return and factor in the 18% GST sitting on top of whichever fee gets charged before you know which one is genuinely cheaper for your situation. SEBI's own disclosure norms require portfolio managers to spell out the exact quantum and manner of every fee payable by the client in the mandatory Disclosure Document, precisely so this comparison is possible before you sign anything (SEBI, Portfolio Managers Regulations - Disclosure Document format; Groww, "SEBI Regulatory Framework for PMS in India").

This is the same discipline we apply to every strategy we cover: the fee structure isn't a footnote, it's part of the score. As outlined on our fee disclosure page, we don't take an upfront commission on any recommendation we're paid a small annual trail of roughly 0.7–0.8%, disclosed to you in writing before any money moves, drawn from the existing expense structure rather than added on top of what you already pay. We hold every provider on our platform to the same bar: a transparent fee statement covering management fees, performance fees, and GST no surprises sitting on page seven.

• Fixed fee suits you if predictable, unchanging costs matter more than anything else, and you're comfortable paying it in a loss year too.
• Profit-sharing suits you if you'd rather pay nothing when performance disappoints, and are comfortable with a larger absolute fee in an exceptionally strong year.
• Hybrid suits you if you want a lower floor cost than fixed-only, with a smaller performance-linked charge layered on top.

None of the three is "cheaper" in the abstract the only way to know which one costs you less is to run your own expected numbers through the step-by-step table for each, the way we've done above, before you sign anything.

A fee percentage on its own tells you almost nothing. The same "2%" or "20% above hurdle" can mean very different things to your net return depending on the base it's applied to, whether GST is layered on top, and how the hurdle and high-water mark actually work in your favour or don't. Running the numbers step by step, the way we've done here, is the only way to see that clearly before you commit.

This is exactly the lens we built Nyra to apply to every PMS, AIF, and GIFT City strategy we cover fee structure priced in, not just headlined, and scored the same way for everyone. If you're comparing strategies and want to see what a fee structure like this looks like on your own numbers, that's what we're here for.