From mint · Sounak Mukhopadhyay · · 1m
Wealthy Investors Use Lombard Lending to Defy Capital Gains Tax
Wealthy investors borrow against shares to delay capital gains tax without selling.
In brief
Wealthy investors borrow against shares to delay capital gains tax without selling. Wealthy investors borrow against shares to delay capital gains tax without selling. Originally reported by mint.
Quick answers
- What is Lombard Lending?
- Investors borrow against pledged shares to raise cash while retaining ownership and delaying capital gains tax.
- What is the key takeaway from Wealthy Investors Use Lombard Lending to Defy Capital Gains Tax?
- Wealthy investors borrow against shares to delay capital gains tax without selling.
What is Lombard Lending?
Investors borrow against pledged shares to raise cash while retaining ownership and delaying capital gains tax.
Loan Terms
Loans typically cover 30% to 60% of share value with interest rates of 9% to 12%.
How It Works
Investors pledge shares to a bank or non-banking financial company to retain dividends and voting rights.
Tax Implications
Borrowing does not trigger capital gains tax but requires repayment with interest.
Example Calculation
Shares worth ₹1 crore with ₹60 lakh gains would cost ₹7.6 lakh in tax if sold, but borrowing ₹50 lakh at 10% interest costs less annually.
Risks
Falling share prices can lead to margin calls, forced sales, and locked losses.
The short version
Wealthy investors borrow against shares to delay capital gains tax without selling.
