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DEPRECIATION under Lease Agreement

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Trex Gaming_67

164 Points Posted on 20 August 2023

who can claim depreciation on asset, lessor or lessee

in case of finance Lease
in case of operating lease
in case of hire purchase

Replies (2)

Quick Summary

This discussion clarifies who can claim depreciation on an asset depending on the type of lease agreement. For finance leases, the lessee typically claims depreciation as they bear the risks and rewards of ownership. In operating leases, the lessor, who retains ownership, claims the depreciation. For hire purchase agreements, the hire purchaser is usually entitled to claim depreciation.

ajay sawlani

29 Points Posted on 21 August 2023

In case of
1) Finance lease - Lessee Claims the depreciation.
2)Operating lease - Lessor Claims the depreciation
3)Hire Purchase Agreement - Hire Purchaser Claims the depreciation.

Musrath Shaik

150 Points Posted on 22 August 2023

The treatment of depreciation depends on the type of lease arrangement: finance lease, operating lease, and hire purchase. The rules vary based on whether the asset is owned by the lessor (the party providing the asset) or the lessee (the party using the asset). Here's how depreciation is typically handled in each case:

Finance Lease:
- Lessor: In a finance lease, the lessor retains ownership of the asset during the lease term, but the lessee has substantially all the risks and rewards associated with ownership. In this case, the lessor usually claims depreciation on the asset since they own it.
- Lessee: The lessee doesn't usually claim depreciation on the asset in a finance lease because they don't have legal ownership. Instead, they account for the lease payments as an expense over the lease term.
  For further more detailed information on this topic visit:Depreciation under the Income Tax
  
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