Advantages Of Leasing

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In India, leasing is not a new concept; leasing transactions took place around 2000 B.C, when Sumerian farmers leased tools from temple priests. Over the Centuries, leases have served many purposes and the nature of legal regulation has varied. Leases, for example, were mainly used for agricultural purposes until the late 18th Century and early 19th Century when the growth of cities in industrialized countries had made leases an important form of landholding in urban areas (Clark, 1978). The first leasing Corporation in India was set up in seventies, named “First Leasing Company of India” which was promoted by Chitambaram Group in 1973 in Madras, by Farouk Irani with industrialist A.C Muthia. However, sluggishness in the growth of leasing companies was …show more content…

It is an alternative to ownership and supports in obtaining funds when other sources are either exhausted or are not feasible and thus a viable tool for maximizing the profits of a corporate entity. Entrepreneurs prefer leasing because it enables them to acquire equipments and make regular payment through earnings generated from use of such leased equipment. Leasing is highly beneficial if the equipment can generate additional earning over and above the lease rental. Thus, leasing is the most popular method of financing and is in the growth finance sector. The lessor will be able to gain from such lease in the amount of tax reduction call a tax shield that a company will be able to claim. Tax incentives lie at the basis of the rapid expansion of the leasing sector in industrialized countries. In order to facilitate entrepreneur’s access to finance for productive equipment, many countries have embraced a tax system that is conducive for both lessor and lessee. The lessor, treated as the owner of the equipment registers the full lease payment (principal and interest). The lessee claims the lease payment as deduction from taxable

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