Page 169 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services Mahesh Kumar Sarva, Lovely Professional University

Notes Unit 11: Leasing

CONTENTS
Objectives
Introduction

11.1 Meaning of Leasing
11.2 Types of Leasing
11.3 Financial Aspect

11.4 Legal Aspect
11.5 Tax Aspect
11.6 Summary
11.7 Keywords
11.8 Self Assessment

11.9 Review Questions
11.10 Further Readings

Objectives

After studying this unit, you will be able to:
Explain the meaning of leasing

State the types of leasing
Discuss financial, legal and tax aspects of leasing

Introduction

A lease is a contract conferring a right on one person (called a tenant or lessee) to possess
property belonging to another person (called a landlord or lessor) to the exclusion of the owner
landlord. It is a rental agreement between landlord and tenant. The relationship between the
tenant and the landlord is called a tenancy, and the right to possession by the tenant is sometimes
called a leasehold interest. A lease can be for a fixed period of time (called the term of the lease)
but may be terminated sooner. The consideration for the lease is called rent or the rental.
11.1 Meaning of Leasing

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must
pay a series of contractual, periodic, tax deductible payments. The lessee is the receiver of the
services or the assets under the lease contract and the lessor is the owner of the assets. The
relationship between the tenant and the landlord is called a tenancy, and can be for a fixed or an
indefinite period of time (called the term of the lease). The consideration for the lease is called
rent.

164 LOVELY PROFESSIONAL UNIVERSITY