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Considering an operating lease?
Lease machinery, equipment and fit-outs from ₹25 lakh to ₹100 crore.
Check eligibilityWhat counts as capex
Spending is capex when it creates or improves an asset that will serve the business for more than a year. Under Ind AS 16 and AS 10, four kinds of cost are usually capitalised.
1
Purchase price, less trade discounts, plus taxes that cannot be recovered. GST claimed as input tax credit is not part of cost.
2
Freight, installation and site preparation needed to get the asset working.
3
Directly attributable costs, such as professional fees and testing before the asset is ready for use.
4
Upgrades that add capacity or extend the asset's life. Routine repairs and maintenance are opex, not capex.
Once capitalised, the asset sits in property, plant and equipment and is depreciated over its useful life. The cash, though, leaves the business when the asset is paid for.
When spending is capex
The line between capex and opex decides whether a cost hits profit now or over several years, and how much cash leaves upfront.
WHAT CHANGES
Capex
Opex
What it pays for
Assets used for more than a year
Day-to-day running costs
Examples
New machine, vehicle, outlet fit-out
Salaries, power, repairs, rent
Effect on profit
Spread over the asset's life via depreciation
Expensed in the year incurred
Cash timing
Mostly upfront
As you go
How capex gets funded
There are three broad routes: pay from internal cash, borrow against the asset, or lease it. Each spreads the cost differently and lands differently in the accounts.
Buy with cash or a loan.
You own the asset, claim tax depreciation and carry the residual value and obsolescence risk. A loan adds debt and usually needs a margin from your own funds.
Lease it.
Rentals replace the upfront outlay. Under Indian GAAP an operating lease is opex; under Ind AS 116 most leases still create a right-of-use asset.
Compare the options on after-tax cash flows over the asset's life, not on the monthly figure alone.
Where it shows up
Fitting out ten new QSR outlets
ILLUSTRATIVE
A QSR chain plans ten outlets, each needing ₹60 lakh of kitchen equipment and fit-out: ₹6 crore of capex in all. Paying cash would use most of the ₹7 crore it holds for stock, salaries and rent deposits. A term loan would add debt and usually need a margin from its own funds. Leasing would turn the outlay into monthly rentals over the lease term. The CFO compares the three on after-tax cost and on how much cash each leaves in the bank while the new outlets ramp up.