Legal and Regulatory Aspect of Lease Financing in India

High growth potential in the leasing industry and the advantage of tax shield, have paved the way for formation of a large number of leasing companies in the recent past. Every industrial house has established a leasing company to function as captive finance house. Some manufacturers are using leasing as sales aid in marketing their products. Laws and regulations applicable to lease financing are discussed in this paper. Though there is no special law which is applicable to such transactions, the few important laws governing the leasing transaction are: Indian Contract Act 1872, The Transfer of Property Act 1882, The Income Tax Act 1961, and the Central Sales Tax Act 1957. The main objectives of these regulations are to safeguard public interest, to enforce discipline in the growth and functioning of NBFCs and to separate good companies from bad ones and viable companies from the unviable ones.