LEASING IN INDIA
BY CS DR PRATIMA
JAIN
FRAMEWORK AND TAX ASPECTS OF
LEASING
WHAT IS
LEASING?
"Leasing is an agreement
where the owner of an asset
(Lessor) allows another party
(Lessee) to use it for a fi xed
period in exchange for periodic
payments."
📌 Key Components:
✔ Lessor → The owner of the
asset (e.g., Tata Motors Leasing).
WHAT IS
LEASING?
"Leasing is an agreement
where the owner of an asset
(Lessor) allows another party
(Lessee) to use it for a fi xed
period in exchange for periodic
payments."
📌 Key Components:
✔ Lessee → The user of the asset
(e.g., an Uber driver leasing a
car).
WHAT IS
LEASING?
"Leasing is an agreement
where the owner of an asset
(Lessor) allows another party
(Lessee) to use it for a fi xed
period in exchange for periodic
payments."
📌 Key Components:
✔ Lease Agreement → Terms of
the lease (tenure, rent,
conditions).
WHAT IS
LEASING?
"Leasing is an agreement
where the owner of an asset
(Lessor) allows another party
(Lessee) to use it for a fi xed
period in exchange for periodic
payments."
📌 Key Components:
✔ Lease Rental → The amount
paid by the lessee.
WHAT IS
LEASING?
"Leasing is an agreement
where the owner of an asset
(Lessor) allows another party
(Lessee) to use it for a fi xed
period in exchange for periodic
payments."
📌 Real-Life Indian
Example
• A Zomato delivery partner leases a two-
wheeler instead of buying one outright.
• Ola Electric allows customers to lease
scooters instead of purchasing them.
TYPES OF LEASING IN INDIA?
OPERATING LEASE
• The asset is rented for a short-term
period.
• Ownership stays with the lessor.
• A startup leases office computers
instead of buying them.
• Zoomcar leases vehicles to
individuals for short-term use.
FINANCE LEASE
• Long-term lease, lessee pays until
the asset is almost fully paid.
• Ownership may transfer at the end.
• Hertz Car Rental in India offers • Construction companies lease JCB
finance lease options. machines for long-term use.
OPERATING FINANCE
LEASE TERM OWNERSHIP LEASE LEASE
Lessor May transfer to Lessee
Short-term Long-term
QUICK
MAINTENANCE
Lessor Lessee
COMPA-
RISON
EXAMPLE
Laptop leasing for Leasing a factory
businesses machine
BENEFITS OF
LEASING
➡️Lessee
📌 Why Businesses Prefer
•Leasing?
✅ Low Initial Cost – No huge
upfront payments.
• ✅ Tax Benefits – Lease payments
are often tax-deductible.
• ✅ Flexibility – Upgrade to newer
assets easily.
• ✅ No Depreciation Worries –
Lessee doesn’t bear asset
depreciation risk.
BENEFITS OF
LEASING
➡️Lessor
📌 Why Leasing is Good for
•Lessors?
✅ Regular Income – Steady cash
flow from lease payments.
• ✅ Asset Retention – Ownership
remains with the lessor.
• ✅ Higher Demand – Businesses
prefer leasing over large capital
investments.
CASE STUDY
A food delivery startup in
Indore leased 20 electric bikes
instead of buying them.
Why?
• No heavy investment is
required.
• Bikes can be upgraded later.
• Leasing costs are tax-
deductible!
✅ Lease rentals deductible as
business expense under
LEASING IN INDIA
Section 37(1) of IT Act.
TAX ASPECTS OF ✅ Reduces taxable income and
lowers tax burden.
FOR LESSEE
✅ Lease rentals are taxable
as business income.
✅ Depreciation benefits FOR
available under the Income LESSOR
Tax Act, of 1961.
REAL-LIFE EXAMPLE
• Tata Motors Leasing
offers car leasing options
to professionals where
lease rentals help save
taxes.
FINANCIAL EVALUATION OF
LEASING
📌 Scenario: A company wants to
buy vs. lease a machine worth
₹10,00,000 for 5 years.
Option Buy Lease
Initial Cost ₹10,00,000 ₹0
EMI or Lease Rent ₹0 ₹20,000 per month
Maintenance ₹50,000 Included
Tax Benefit Depreciation only Full rental tax deduction
Ownership Yes No
📌 Conclusion: Leasing is a good choice
when upfront costs and maintenance
expenses need to be minimised.
CONCEPT OF LEASING IN
PERSONAL LIFE
📌 Scenario: You want to buy a
house or rent out for a living.
Option Buy Lease
Initial Cost ₹50,00,000 ₹0
EMI or Lease Rent ₹0 ₹18,000 per month
Maintenance ₹50,000 Included
Rent paid can help lower
taxable income via a
Interest of Home Loan
deduction under Section
Tax Benefit is Tax deductible under
80GG, particularly for
section 24 (b)
individuals who do not
receive HRA.
Ownership Yes No
📌 Debate: What is good investment,
Buying a house or renting it out?
KEY
TAKEAWAYS &
RECAP
📌 Summary of Key Points
✅Leasing is a financial service where an asset is used
for periodic payments.
✅Types: Operating Lease (Short-term) vs Finance
Lease (Long-term, ownership transfer).
✅ Benefits: Tax savings, flexibility, low investment, no
depreciation risk.
✅ Lessor’s View: Earn regular income, and retain
ownership.
