Question ID : 44759

Land Lease Charges

Whether land lease charges paid upfront for future period (say, for next 50 years) allowable under IT Act over the same period?

Since the benefit of the lease extends over the entire period (e.g., 50 years), the deduction cannot be claimed fully in the year of payment. Instead, the expense is required to be amortized over the lease period and claimed proportionately each year. According to Accounting Standard (AS) 19 or Ind AS 116 for leases, upfront lease payments are treated as prepaid expenses and amortized over the lease term.