Car lease Policy in India

For all those who love the thrill of changing cars quite often car leasing is the best option. Those who do not wish to get involved in the hassle of maintenance and repair, car leasing works out to be the best option available. The leasing company offers package which often includes various inconveniences that a customer wants to avoid. Sadly, the convenience of leasing comes at a cost as the car lease policy in India demands a higher tax deduction. The leasing price is determined on the basis of tenure of lease and the annual usage.  If the tenure and distance travelled in a year is higher, so will be the lease rental and vice versa.


So the basic thing is analyzing the rough estimate of usage. Car leasing for business purpose get a tax break as the law enables businesses to deduct the monthly leasing payments as an expense. In almost all states, sales tax can be paid on the monthly payments and not on the vehicle price. Car leasing business in the country has gained immense popularity since the year 2005 mainly because of its simplistic and temporary structure.


The introduction of GST was further expected to boost the booming vehicle leasing market in India, but the cumulative effective rate of 43%, comprising 15% compensation cess and 28% GST left the industry hugely disappointed. It was straightaway hiked from 13.5% to 14.5% VAT rate from the old taxation structure. After combined pleas from the leasing companies, Ministry of Finance has announced 35% abatement in rates and only 65% of the applicable rate of GST will be applied on taxable value and will be applicable until 1^st July 2020.