One major advantage of a loan against mutual funds is its tax efficiency. Since the investor does not sell units, no capital gains tax is triggered at the time of borrowing. This helps preserve long-term compounding benefits. Selling mutual funds, especially equity holdings, can attract short-term or long-term capital gains tax depending on the holding period. These taxes can reduce effective liquidity received. Interest paid on LAMF is generally not tax-deductible for personal use, but it may be claimed as a business expense if used for eligible business purposes. Apply Now