CA explains the money management strategy that separates the rich from others. How they use debt to build more wealth

For many middle-class families, debt is usually seen as something risky. Loans are often linked with financial pressure, EMIs and long-term liabilities. But according to Chartered Accountant Nitin Kaushik, wealthy people often look at debt very differently. Instead of avoiding it completely, they use it carefully as a financial tool to grow wealth and keep investments working for them.

In a recent post, Kaushik explained how many rich individuals prefer taking loans against their existing assets rather than selling investments. He said this method helps them access money without immediately triggering taxes or disturbing long-term wealth creation.

Why wealthy people avoid selling assets quickly

According to Kaushik, one common strategy among high-net-worth individuals is borrowing against assets such as stocks or property instead of liquidating them. He explained that selling a high-performing investment can lead to capital gains tax, which may range between 12.5 per cent and 20 per cent depending on the asset and holding period.


He said, “The truly wealthy don’t avoid debt they use it as a strategic, tax-efficient tool to accelerate growth.”

The CA further explained that instead of selling shares or property, wealthy investors often opt for asset-backed loans. These loans are usually taken against an existing investment portfolio and may come with interest rates of around 9 to 10 per cent.

This approach gives them immediate liquidity while their original investments continue to remain in the market and potentially grow further over time.

How this strategy works in practice

Kaushik pointed out that borrowing against assets allows investors to access funds for business expansion, reinvestment or other financial needs without creating a taxable event. That means they do not have to pay capital gains tax immediately because technically the asset has not been sold.

He wrote, “Instead of selling a high performing stock or property and paying 12.5% to 20% in capital gains tax, they often take an asset backed loan against their portfolio at 9% to 10% interest.”

This strategy is often used in business circles where liquidity is important. A person may own valuable stocks or property but may not want to exit those investments too early. Taking a loan against them can provide temporary cash flow while the underlying assets continue compounding in value.

Debt is not always negative

Kaushik also highlighted that in India, borrowing against personal assets remains one of the few ways to access large amounts of capital with relatively lower tax impact.

He said, “In India, borrowing against your own assets is one of the few ways to access capital without significant tax impact.”

Still, he warned that this approach only works when used with planning and discipline. Loans taken without repayment planning or proper returns can become a burden very quickly. The strategy is generally used by people who already have strong assets, stable cash flow and a long-term investment plan.

“When used carefully, and with a clear return strategy, debt becomes a tool for wealth creation not a liability to fear,” Kaushik added.

Financial experts often say there is a major difference between productive debt and unnecessary debt. While loans for luxury spending can weaken finances, borrowing for business growth or investment opportunities may help build wealth when managed responsibly.

For ordinary investors too, the bigger takeaway may not be about taking more loans, but understanding how money, taxes and long-term investing work together.