A lease is a contractual arrangement calling for the lessee (user) to pay the lessor(owner) for use of an asset.

Features of Lease

• Generally there are two parties to a lease agreement

• Leasing is used for financing the use of fixed assets of high value. In India equipment leasing is very popular.

• The term of the lease is called the lease period. It is the period for which the lease agreement is in operation.

• Lease rentals constitute the consideration payable by the lessee as specified in the lease transaction.

Lease vis-à-vis Buy

Lease vis-à-vis Buy• Ownership

• Up-front costs

• Monthly payments

• End of term

Lease Evaluation inpractice• Basic tax treatment of lease• Rates of depreciation• Depreciation allowance on

lease transactionslease transactions• Sale and leaseback

transactions

Legal Aspects of Leasing

• 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

• Since an equipment lease transaction is • Since an equipment lease transaction is regarded as a contract of bailment, the obligations of the lessor and the lessee are similar to those of the bailor and the bailee