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Considering an operating lease?
Lease machinery, equipment and fit-outs from ₹25 lakh to ₹100 crore.
Check eligibilityWhat opex is
Opex covers what a business spends to keep running, as opposed to what it spends on assets that last for years. Typical items fall into four groups.
1
People: salaries, wages and benefits for staff.
2
Premises and utilities: rent, power, water and housekeeping.
3
Upkeep: repairs, maintenance contracts and consumables that keep equipment running.
4
Equipment rentals: under Indian GAAP (AS 19), operating lease rentals are expensed on a straight-line basis over the lease term.
Ind AS 116 changes the last item for most leases: lessees report depreciation on a right-of-use asset and interest on a lease liability, not a rental expense. Short-term and low-value leases can be exempt.
When spend counts as opex
Whether a cost is opex or capex depends on what it buys and how long the benefit lasts. The split changes how it shows up in your accounts.
WHAT CHANGES
Opex
Capex
What it pays for
Running the business this period
Assets that give a benefit for years
In the profit and loss
Expensed when incurred
Charged over time as depreciation
On the balance sheet
No asset recorded
Recorded as a fixed asset
Equipment example
Repairs and servicing
Buying the machine
How leasing affects opex
Leasing turns a one-time purchase into a series of rentals. How those rentals show up depends on your accounting framework, so it is worth modelling both buying and leasing before you choose.
Under Indian GAAP (AS 19).
Operating lease rentals are expensed on a straight-line basis over the lease term. The asset stays off the balance sheet, and no purchase is recorded as capex.
Under Ind AS 116.
Most leases put a right-of-use asset and a lease liability on the balance sheet. The P&L shows depreciation and interest, not one rental line.
Tax deductions and GST input credit on rentals depend on the facts. Confirm with your tax adviser.
Where it shows up
A QSR chain's kitchen equipment
ILLUSTRATIVE
A QSR chain reporting under Indian GAAP plans 10 new outlets, each needing ₹30 lakh of kitchen equipment: ₹3 crore in total. Buying would be capex: ₹3 crore paid upfront, then depreciation over the equipment's life. Leasing the same equipment at an assumed ₹6 lakh a month across all outlets makes it opex: ₹72 lakh a year (₹6 lakh × 12) of rental expense in the P&L, paid from operating cash flow. The CFO compares the two on total cost, cash flow and loan covenants, not on the label alone.