How Rich People Pay No Taxes

How Rich People Pay No Taxes Poster

Ambani Draws 0 Salary From Reliance.

Many billionaires follow the same route, the reason being:

Smart Understanding of Money.

The Rich are Rich not just because they know how to make money.

They know how to use that as leverage.

PS: I have posted another note covering all key doubts on this. 

Check it out if you have more questions :)

Let me break it down:

[1] Every big founder owns a major stake in their company.

>> And this is through equity in that company.

Now as we all know these are not liquid until you sell off the stocks (except for dividends).

[2] But if you do, there are 2 issues:

>> You pay capital gains and income tax on it.

>> It looks bad for the company if the owner sells the stake continuously.

[3] But they have one option.

>> To borrow against their shares.

This simply means using these shares as collateral.

>> This way you are not taxed.

Since you are working with Debt.

[4] In an ideal situation.

>> Their stock price can go up, even faster than the loan rates.

>> Plus they have easier access to debt (at better rates).

So they can always use more Debt to pay off these loans.

[5] The core principle is that they will always be remunerated through shares and stocks.

>> And this is NOT WRONG.

>> It's just being smart with the cards you have been dealt.

[6] On top of this, almost everything can be offset as expenses for them.

>> Businesses have the leeway to offset their revenue before they declare profits.

>> Whereas Individual Salaried Class pays Tax Deducted at Source (so we have no such exceptions).