Company Lease Flats in Mumbai
Company lease and personal lease agreements are almost identical, with the main difference being that in a company lease agreement, it is not necessary to mention the name of the occupant. Instead, the company’s name will appear as the lessee.
The process of leasing out a property to a corporate is same as in a personal lease. The agreement must be signed and registered in court, and once the advance rent and security deposit are paid by the company, the designated occupant takes possession of the property.
An overview of the Company Lease Accommodation (CLA)
- In a CLA, the Company is liable for any default, damage or any breach of the terms and conditions which are usually outlined in the Leave and License Agreements.
- A CLA can be signed in for any period of 12 months to 60 Months.
- It is more favored with the owners to give their properties in the name of the Company, Corporates etc. as they are more comfortable dealing with a Company than an individual.
- A lot of Executives prefer taking apartments on Individual Lease as well, but they work with the same companies as they save on some "Fringe Benefit Taxes."
- Over the past few years owners have become comfortable in giving the apartments to Senior Executives Individually as there is no Tax Deduction at Source (TDS) (Roughly for Individuals 16.99%, NRI’s 30%, Companies around 25%). If the Employee or the Executive comes forward especially with a family and a secured job, property owners do not fret too much, the best way to secure them is to take Post Dated Cheques or Advance Rent and a decent deposit to take care of any damages or pending electricity bills etc. A few good references also help the Owners get the required confidence.
Individual lease is entered between the individual who is leasing the property; and the owner.
Individual leasing is a mix benefit arrangement to both the Licensor and the Licensee in a transaction.
- The transaction becomes simpler without the involvement of the Company and the Legal and the Finance department.
- There is not Tax Deduction at Source, hence the owner of the property gets the entire amount of the license fees as stipulated in the Leave and License agreement.
- Most individuals develop a one to one relationship with the property owners and decide mutually on the Lock in period, termination rights, escalations and amenities to be provided etc.
- Most of the leases are short term beginning from 1 year to 3 years with an exit clause incorporated from both sides.
- Most of the owners insist on a reasonable deposit and the payment of rents by virtue of Post Dated Cheques of the rent for each month.
- The New Maharashtra Rent Act it is absolutely safe to enter into an agreement for a period of 1 to 5 years of leave and license and pay appropriate stamp duty and duly register the agreement for safety.
- A company letter will be required by the owner if the individual is an employee of a company and his bonifides if he owns a business.
- It is also mandatory to get a Police Verification done and follow the society procedures for leasing out any apartment
Fringe Benefit Tax (FBT)
Any benefits or perks that employees get as a result of their employment are to be taxed, but in this case in the hands of the employer. This includes employee compensation other than the wages, tips, health insurance, life insurance and pension plans.
Employees get many benefits at the cost of the employers. If a benefit is fully attributable to an employee, it is taxed in the hands of the employee. Where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees, they shall be taxed in the hands of the employer, and this tax is called Fringe Benefit Tax. An employer is liable for fringe benefit tax even if they do not have any income which is chargeable to the income tax.
Employees of Companies working in Mumbai used to prefer entering into a leave and license agreement because of the Fringe Benefit Tax (FBT).
In the current year budget, this FBT has been abolished giving relief to a lot of employees and employers of this direct hit.