How 'Loan Against Securities' (LAS) Gives You Money Without Triggering Capital Gains Tax
 |
| How 'Loan Against Securities' Gives You Money Without Triggering Capital Gains Tax |
Your finger hovers over the "Sell" button on your Zerodha or Groww app.
STOP! Do not sell.
If you sell, you trigger a painful tax event under India's new tax regime. Worse, you kill the "Compounding Effect" of those shares forever. There is a smarter way to unlock that cash while keeping your shares: Loan Against Securities (LAS).
Why "Selling" is a Financial Disaster (The Tax Hit)
Let's do the math on why selling is expensive in 2026.
- The Tax Hit: If you sell shares for a ₹5 Lakh profit within a year, you now pay 20% STCG (Short Term Capital Gains) to the government. That's ₹1 Lakh gone instantly. Even Long Term Gains are taxed at 12.5%.
- The Opportunity Cost: If Tata Motors rallies 30% next year, you miss out on that growth because you sold.
- The Re-entry Risk: When you finally have cash again, the stock price might be double what you sold it for. You can never buy back the same quantity.
Enter LAS: The "Have Your Cake and Eat It Too" Strategy
Loan Against Securities (LAS) allows you to pledge your shares (or mutual funds) to a bank or NBFC. They give you a loan limit, and you keep the shares.
✅ Why LAS Beats Personal Loans
- Cheaper Interest: Personal Loans charge 14-18%. LAS rates typically hover between 9.5% to 11% because it is a secured loan.
- You Keep Benefits: Even though the shares are pledged, YOU still receive the Dividends and Bonuses. If the stock price goes up, your portfolio value still goes up.
- Overdraft Facility (The Best Part): Unlike a Personal Loan where you pay EMI on the full amount, LAS is an Overdraft. If you are approved for ₹5 Lakhs but only use ₹1 Lakh for 10 days, you only pay interest on ₹1 Lakh for 10 days. If you don't use the money, you pay ₹0 interest.
The "LTV" Rule: How Much Can You Get?
You cannot borrow 100% of your portfolio value. The RBI sets strict Loan to Value (LTV) limits to protect lenders from market volatility.
- Equity Shares: Typically 50% LTV. (e.g., Portfolio ₹20 Lakhs = Loan Limit ₹10 Lakhs).
- Equity Mutual Funds: Typically 50% LTV.
- Debt Funds / Bonds: Up to 80% LTV (Since they are less volatile).
(Note: Not all shares are eligible. Banks usually have an "Approved List" of top 500 liquid stocks (Group A). Penny stocks or highly volatile small-caps are often rejected.)
The Risk: What is a "Margin Call"?
There is one danger you must know. Since stocks are volatile, if the market crashes, the value of your collateral drops.
Scenario:
You pledged ₹10 Lakhs of shares to get a ₹5 Lakh loan.
The market crashes 40%. Your shares are now worth ₹6 Lakhs.
The bank's safety margin is gone. They will issue a "Margin Call."
You must either:
A) Pledge more shares immediately.
B) Pay back part of the loan immediately.
If you do neither, the bank has the right to sell your shares to recover their money.
Action Plan: How to Pledge Digitally
Gone are the days of physical forms. You can now do this in minutes via apps.
- Check Your Broker: Zerodha (via Zerodha Capital), Upstox, and Groww have direct tie-ups. Alternatively, HDFC Bank and ICICI Bank offer "Digital LAS" against CAMS/Karvy statements.
- Select Shares: Log in and select which shares you want to pledge. The system will calculate your "Available Loan Amount."
- OTP Verification: You will receive an OTP from NSDL or CDSL to authorize the pledge. This is the final approval step.
- Get Cash: The limit is usually activated within 4 to 24 hours. You can transfer the cash to your bank account instantly.
(Disclaimer: LAS interest rates are floating and can change. Processing fees of approx ₹500 - ₹999 + GST may apply. Always maintain a buffer in your LTV to avoid margin calls during market corrections. This is not financial advice.)
Unlock Wealth Without Selling
Your portfolio is a long-term wealth machine. Don't kill it for a short-term cash crunch. Pledge it, use the cash, pay it back, and watch your wealth continue to grow.
0 Comments