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The finance (hire purchase) company purchases the equipment from the equipment supplier and lets it on hire to the hirer to use it, who is reqired to make a down payment of say 20-25 per cent of the cost and pay balance with interest in Equated Monthly instalments.
In Instalment sale, the contract of sale is entered into, the goods are delivered and the ownership is transferred to the buyer, but the price of the goods is paid in specified instalments over a definite period.
Though the hire purchaser is not the owner of the asset, he is entitled to claim depreciation as a deduction, on the entire purchase price.
The consideration for hire received by the hire vendor, is liable to tax, under the head profits and gains of business and profession. The hire income from house property is generally taxed as income from House property.