2. Hire Purchase
Hire – purchase is a type of installment
credit under which the hire-purchaser,
called the hirer, agrees to take goods on
hire at a stated rental, which is inclusive of
the repayment of principal as well as
interest, with an option to purchase.

3. Characteristics of Hire
purchase
• Hire-purchase is a credit purchase.
• The price under hire-purchase system is paid in
installments.
• The goods are delivered in the possession of the
purchaser at the time of commencement of the
agreement.
• Hire vendor continues to be the owner of the goods
till the payment of last installment.till the payment of last installment.
• The hire-purchaser has a right to use the goods as a
bailer.
• The hire-purchaser has a right to terminate the
agreement at any time in the capacity of a hirer.
• The hire-purchaser becomes the owner of the goods
after the payment of all installments as per the
agreement.
• If there is a default in the payment of any
installment, the hire vendor will take away the goods
from the possession of the purchaser without
refunding him any amount.

6. Difference between Hire
Purchase and Leasing
•Meaning
•Option to
useruser
•Nature of
expenditure
•Components

8. Legal Aspects of Hire
purchase
• The Hire purchase Act was passed in 1972. An
Amendment bill was introduced in 1989 to amend
some of the provisions of the act.
The act contains provisions for regulating:
1. the format / contents of the hire-purchase
agreementagreement
2. warrants and the conditions underlying the hire-
purchase agreement,
3. ceiling on hire-purchase charges,
4. rights and obligations of the hirer and the owner.
In absence of any specific law, the hire purchase
transactions are governed by the provisions of the
Indian Contract Act and the Sale of Goods Act.

9. Tax implications of Hire
Purchase
• Under a Commercial Hire Purchase, tax deductions
may be available when the vehicle is used for
business (income producing) purposes.
• Generally, under a Commercial Hire Purchase tax
deductions can be claimed for depreciation on the
vehicle (up to the Depreciation Limit), and interestvehicle (up to the Depreciation Limit), and interest
charged on the loan.
• With a Commercial Hire Purchase, GST is charged on
the purchse price of the car, and also on any term
charges or fees.
• Customers who are registered for GST on an Accruals
basis or Cash basis can claim the GST contained in the
purchase price of the vehicle as an Input Tax Credit on
their next BAS.