Is a Loan Against Mutual Funds (LAMF) taxable?

No. The loan amount received under a Loan Against Mutual Funds is not taxable because it is a financial liability, not income. Pledging mutual fund units does not create a taxable event.

Are interest payments on a Loan Against Mutual Funds tax-deductible?

Interest paid on a Loan Against Mutual Funds may be deductible if the loan is used for eligible business purposes or certain qualifying house property purposes, subject to the Income Tax Act. Interest on loans used for personal expenses is generally not deductible.

Does pledging mutual funds trigger capital gains tax?

No. Pledging mutual fund units only creates a lien in favour of the lender. Since there is no sale, redemption, or transfer of ownership, capital gains tax is not triggered.

What happens if the lender liquidates my pledged mutual fund units?

If the lender liquidates pledged mutual fund units due to loan default, the redemption becomes a taxable event. Capital gains tax will apply according to the type of mutual fund and the applicable holding period under the Income Tax Act.

Did Budget 2026 change the tax treatment of Loan Against Mutual Funds?

Budget 2026 removed the deduction for interest on loans used to invest in shares or mutual funds, effective from 1 April 2026. Borrowers using a Loan Against Mutual Funds for such investments can no longer claim this interest as a deduction against dividend or mutual fund income.

Loan Against Mutual Funds Tax 2026

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Liquify | Wednesday, July 22nd, 2026, 4:39:34 PM

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