Employees of Companies working in Mumbai used to prefer entering into a leave and license agreement because of the Fringe Benefit Tax (FBT).

Definition of the Fringe Benefit Tax (FBT)

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.

In the current year budget, this FBT has been abolished giving relief to a lot of employees and employers of this direct hit.

Individual leasing is a mix benefit arrangement to both the Licensor and the Licensee in a transaction.

Ease of entering into a transaction as it becomes simpler, without the involvement of the Company and the Legal and the Finance department. No Tax Deduction at Source, an individual taking a property on lease is not entitled to deduct any tax and 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. We strongly advice both the owner of the property to insist on this from the individual and also advice all individuals to give the post dated cheques for rent to honour the spirit of transaction. A lot of owners in Mumbai feel that leasing to individuals is not safe, given the past history of the Mumbai rent act etc., however, as per 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. We recommend each owner to take a confirming letter that the individual is an employee of a company or if he is a business person to take his/her bonafides prior to entering into a leave and license agreement. It is also mandatory to get a Police Verification done and follow the society procedures for leasing out any apartment

At realestatemumbai.com we understand all these processes well and if you need any further advice or would like to lease your property or if you want a property on rent then please feel free to list your requirement or mail us.