A lease represents a contractual arrangement where by the lessor grants the lessee the right to use an asset in return for periodic lease rental payments.
Lease arrangements can be broadly divided into two categories:-
1. Operating
2. Financial leases
An operating lease is a short term lease which is not fully amortized. A financial lease, on the other hand, is a long term leaves which is fully amortized.
As there is no separate statue for equipment leasing in India, the provisions relating to bailment in the Indian contract Act govern equipment leasing agreements as well. The lease agreement specifies the legal rights and obligations of the lessor and lessee.
The lazy can claim lease rentals as tax deductible expenses and the lessor can claim investment allowance and depreciation on the investment in leased assets.
Please transactions are disadvantages from the sales point of view for two reasons:
1. The lessor is not entitled to be concessional rate of Central sales tax and,
2. Several state governments levy sales tax on lease rentals.
In finance literature, a leasing definition is commonly regarded as a financing decision. The definition to invest in the effort is taken for granted the option of living is compared with the option of buying with borrowed fund.
