Lease financing
Querist : Anonymous
Our company is planning to buy a machinery on lease financing. Major terms of lease are as follows:
1. All the risks and rewards are transferred at the time of lease start
2. We will pay monthly lease rental comprising of principal and interest.
3. At the end of term of lease, we will be offered an option to legal entitlement at a token money.
As per AS-19, we will book the asset at full cost in our books of accounts, provide depreciation and reduce lease liability by each monthly principal payment.
My doubt is for income tax computation:
1. Are we entitled to depreciation? I believe not. Will we be entitled to depreciation after end of lease when we get the ownership?
2. What will be monthly lease rental expenses allowed under income tax? Only interest or interest and principal both.
02. The full amount (What you are referring as principal +interest) will be allowed as lease rent
Querist : Anonymous
Please advise whether ST will change to 15%?
Querist : Anonymous
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