Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Debt PMS in India: Meaning, Benefits & How to Choose the Best

Wealth Services

Debt PMS in India: Meaning, Benefits & How to Choose the Best

Debt PMS in India: Meaning, Benefits & How to Choose the Best

As an investor, you might always be on the lookout for new and interesting investment options that promise you excellent returns, regular income, and carry low risk. One emerging investment avenue in the market is Debt Portfolio Management Service (PMS), an investment solution focusing on optimal capital allocation and risk-adjusted returns.

Debt PMS is a scheme offered by portfolio management companies to manage and optimise debt investments for those individuals or institutions who do not have the time and the expertise to manage their investment portfolios.

In this article, we’ll explore everything about Debt PMS.

What is Debt PMS and How Does It Work

Debt PMS is a professional service targeted at high-net-worth individuals who want to invest in the debt market and generate better returns with a well-diversified and managed portfolio. It involves creating a portfolio of debt instruments, such as bonds, debentures, commercial papers and preferred capital, tailored to meet the investor’s specific financial goals, risk tolerance, and investment expectations.

While conventional debt instruments like FDs and debt mutual funds carry low liquidity and / or underwhelming returns, Debt PMS is a fixed-income portfolio management service that aims to invest in debt portfolios and generate risk-adjusted returns and a regular income stream / Capital appreciation for the investor.

It invests in rated and listed securities, which have the potential for higher returns and better liquidity. Depending on the market conditions, PMS can combine Hold-to-Maturity and opportunistic trading strategies.

Also, read: Read the difference of PMS vs MF

Benefits of Investing in Debt PMS

Debt portfolio management services offer investors an opportunity to generate capital gains while minimising the risk by investing in the debt market. The investment is made through a professional fund management team with knowledge of the debt market and the technical expertise of interest rate cycles and portfolio management.

Debt PMS relies on an active and flexible investment approach to deliver attractive long-term returns and manage liquidity risk by capitalising on fixed-income investment opportunities. This investment strategy helps manage risk through comprehensive credit analysis, brings diversification, and provides an attractive debt allocation option.


1. Professional expertise

Debt PMS offers access to experienced fund managers with expertise in analysing and selecting suitable debt instruments. They follow a flexible investment strategy to bring you regular cash flow or capital appreciation.

2. Customised solutions

Within Debt PMS, portfolio managers tailor investment strategies aligning with your financial goals and risk appetite.

3. Better returns

It offers the potential for better risk-adjusted returns than managing investments independently, as portfolio managers exploit the market trends and opportunities to generate attractive returns.

4. Tax treatment

Income from debt PMS can be classified either as interest income or as capital gain. If it is treated as interest income, the income will be taxed at the marginal rate of taxation.

Meanwhile, in terms of capital gains, STCG on the sale of bonds or NCDs is taxed at the applicable tax rate of the investor, while LTCG on listed bonds or securities is taxed at 10% without indexation.

Also, read – What is Credit appraisal? Meaning, process & importance

Who Should Invest in Debt PMS?

Debt PMS is suitable for investors seeking capital preservation and regular income or growth. It is perfect for investors across risk profiles who want to hold a fixed-income portfolio and generate low to high returns. Ideally, both individual and institutional investors, like partnership firms, HUFs, sole proprietors, and corporate bodies, can invest in Debt PMS.

Also, read – Understanding the Credit Quality of Debt Funds

Types of Debt Instruments in PMS Portfolios

Debt PMS portfolios invest across a wide mix of fixed-income instruments to balance safety, returns, and risk. These include government bonds and treasury bills, which offer high stability and low risk. To improve returns, portfolios may also hold corporate bonds, non-convertible debentures, commercial papers, and market-linked debentures.

Some strategies include higher-rated AA or AAA bonds for stability, while others add lower-rated bonds to earn better yields with higher risk. Debt PMS can also invest selectively in REITs, INVITs, or sector-specific bonds. Fund managers actively adjust holdings to capture opportunities, protect capital, and generate steady income for investors.

Also, read – Decoding Credit Ratings:Importance, Range, and Functionality

Key Risk Factors and Considerations in Debt PMS

Here are some risk factors you should consider before investing in Debt PMS:

Credit Risk: Debt PMS invests in bonds issued by companies or institutions. If the issuer is financially weak, there is a risk of delayed payments or default. Credit ratings help assess this risk, but they are not a guarantee of safety.

Interest Rate Risk: Bond prices move opposite to interest rates. When market interest rates rise, existing bonds lose value, which can reduce portfolio returns. Falling rates can improve bond prices and gains.

Liquidity Risk: Some debt instruments may not be easy to sell quickly. During high redemption pressure, selling such assets can affect portfolio value and returns.

Portfolio Concentration Risk: Heavy exposure to one issuer or sector can increase losses if that area faces trouble.

Market Volatility: Even debt markets react to economic changes, inflation, and policy decisions, which can impact performance.

Also, read – How to Diversify a Mutual Fund Portfolio?

Debt PMS vs Debt Mutual Funds vs FDs: Key Differences

What is Debt PMS, and how does it differ from debt mutual funds?

FactorFixed Deposits (FDs)Debt Mutual FundsDebt PMS
Investment typeBank deposit with fixed interestPooled investment in debt securitiesCustomised portfolio of debt instruments
RiskVery low riskLow to moderate riskModerate risk
ReturnsFixed and predictableMarket-linked, may varyMarket-linked, potentially higher
Interest Rate RiskNoYesYes
LiquidityLimited, penalty on early withdrawalHigh, easy redemptionMedium, depends on PMS terms
Investment HorizonShort to medium termShort, medium, or long termMedium to long term
TaxationInterest fully taxableTaxed as per income slabTaxed as per income slab
Suitable ForVery conservative investorsConservative to moderate investorsHNIs seeking stable, managed returns

Also, read – Rise of Private Credit: Investors’ Gold Dust

Best Debt PMS in India: Top Performers & Reviews

When looking at debt PMS in India, several strategies have stood out recently for steady performance and risk-controlled returns. One of the best debt PMS in India is Maximal Capital’s Income Fund, which has delivered strong annualised returns over multiple years, with figures showing over 20% annualised returns in recent periods.

Additionally, some managers design conservative portfolios focused on high-quality AAA/AA bonds, targeting stable income with lower default risk. Others take a slightly higher credit risk approach to potentially earn better yields, sometimes in the 9–12% range for certain strategies.

Performance varies widely across providers, with some debt PMS strategies returning modest annual gains and others achieving higher diffused returns by actively managing duration and credit exposure.

If you are interested in investing in debt PMS, make sure to compare past performance, risk management approaches, and fee structures. Also, look at how the strategy handled interest rate changes and credit events in different market conditions.

How to Choose the Best Debt PMS in India

Define Your Goal: Be clear about why you are investing. Debt PMS works best for stable income, capital protection, and moderate growth.

Check Past Performance: Look at returns over different years and market conditions. Consistency is more important than one-time high returns.

Understand Risk Exposure: Review the quality of bonds used. Portfolios with government or highly rated bonds are safer than those with lower-rated debt.

Evaluate the Fund Manager: An experienced manager can manage interest rate changes and credit risks more effectively.

Review Fees and Minimum Investment: Debt PMS usually needs higher investment amounts and charge management fees. Make sure these suit your budget.

Assess Transparency: Choose PMS providers who share regular portfolio updates and clear investment strategies.

Minimum Investment, Fees & Charges in Debt PMS

Debt PMS requires a minimum investment of Rs. 50 lakh, making it suitable for high-net-worth individuals, business owners, and experienced investors seeking a larger, customised portfolio. After the initial investment, additional top-ups are allowed. Fees in Debt PMS vary and usually follow three models:

  • Fixed Fees: An annual charge on the total portfolio value.
  • Performance Fees: Applied only when returns exceed a set target, encouraging better performance.
  • Hybrid Model: A combination of fixed and performance fees.

Process to Start Investing in Debt PMS

Here’s how you can start investing in debt PMS:

Research and Select: Choose a PMS provider that matches your investment goals and risk profile.

Initial Meeting: Discuss your financial goals, investment horizon, and risk appetite with the PMS manager.

Documentation: Complete KYC, provide identity proof, income details, and other required documents.

Investment Agreement: Sign the PMS agreement outlining fees, investment strategy, and terms.

Fund Transfer: Transfer the minimum required amount (₹50 lakh or more) to start your investment.

Portfolio Management: PMS manager builds and monitors your customised debt portfolio.

Conclusion

PMS offers a range of benefits for investors seeking stability, customisation, growth, and expertise in their investment choices. Kickstart your investment journey with experts at Tata Capital Wealth. Explore suitable investment options, manage your portfolio, and get professional guidance.

Build Your Wealth with Expert Guidance from Tata Capital!

Apply now
Popular Searches
aif full form pms vs mutual fund bnpl meaning debt investment options debt syndication unlisted equity shares meaning gold etf vs gold bond plot plus construction loan

FAQs

What is Debt PMS, and how does it differ from debt mutual funds?

Debt PMS or debt direct portfolio management is a professionally managed portfolio of debt instruments customised for individual investors. Unlike debt mutual funds, it offers personalised portfolios, direct ownership of securities, and strategies tailored to the investor’s goals and risk profile.

Who can invest in Debt PMS in India?

Debt direct portfolio management is suitable for high-net-worth individuals (HNIs), business owners, and experienced investors. Only those who can invest Rs. 50 lakh or more and want a personalised debt portfolio management can consider this investment option in India.

What is the minimum investment required for Debt direct portfolio management?

SEBI mandates a minimum investment of Rs. 50 lakh to start a Debt PMS. Investors can also make additional top-ups after the initial investment to grow their customised portfolio over time.

Are Debt PMS returns guaranteed?

No, Debt direct portfolio management returns are not guaranteed. The performance depends on market conditions, interest rate changes, and the manager’s investment choices. Returns can fluctuate, so past performance does not ensure future gains.

What are the key risks associated with Debt direct portfolio management?

Debt direct portfolio management carries risks such as credit risk, interest rate risk, liquidity risk, and market fluctuations. These risks can impact the portfolio’s value and returns, even though professional management aims to minimise them.

How is Debt PMS taxed in India?

Debt PMS returns are taxed like debt mutual funds. Short-term gains are added to income and taxed as per slab rates. Long-term gains, held for over three years, are taxed at 20% with indexation benefits.

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Home Loan EMI Calculator

Business Loan EMI Calculator

Used Car Loan EMI Calculator

Two Wheeler Loan EMI Calculator

Loan Against Securities Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download