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Ind AS 116 Lease Calculator.

Ind AS 116 brings most operating leases on to the balance sheet. Calculate ROU asset measurement, lease liability, monthly interest split, and the year-by-year P&L impact.

Inputs

Monthly lease payment (₹)

Lease term (months)

Including reasonably certain extensions.

Incremental borrowing rate (% p.a.)

Lessee’s incremental borrowing rate at commencement, used to discount payments.

Initial direct costs (₹)

Incremental costs to obtain the lease — broker fees, legal etc. Added to ROU.

Lease payments before commencement (₹)

Lease incentives received (₹)

Reduce ROU.

Result

Lease liability at commencement (PV of payments)₹24,08,669

ROU asset at commencement₹24,08,669

Year 1 interest expense₹2,00,570

Year 1 depreciation (ROU SLM)₹4,81,734

Year 1 total P&L impact₹6,82,304

Total payments over term₹30,00,000

Total interest₹5,91,331

Year-end balances

Year	Interest	Principal	Closing Liab
Year 1	₹2,00,570	₹3,99,430	₹20,09,239
Year 2	₹1,63,101	₹4,36,899	₹15,72,340
Year 3	₹1,22,117	₹4,77,883	₹10,94,457
Year 4	₹77,288	₹5,22,712	₹5,71,746
Year 5	₹28,254	₹5,71,746	₹0

How Ind AS 116 works.

For lessees, Ind AS 116 (effective FY 19-20) replaced AS 19’s on/off-BS distinction with a single on-BS model: at commencement, recognise an ROU asset and a lease liability. The liability is the PV of remaining lease payments at the incremental borrowing rate. The ROU adds initial direct costs and prepayments, reduces incentives received. Subsequently, the ROU depreciates on a straight-line basis over the shorter of the lease term and asset useful life; the liability unwinds with interest at the discount rate.

Two practical recognition exemptions: short-term leases (≤ 12 months) and low-value leases (asset value ≤ ~$5,000 / ₹4 lakh as a guideline). These can stay off-BS, expensed straight-line.

On CORAA

Lease audit-evidence and recomputation flow through the Lease Liabilities working paper and the Working Papers hub. Pair this calculator with that WP for audit-ready output.

Lease Liabilities WP template More calculators

How Ind AS 116 lease accounting works

Ind AS 116 — "Leases" — became effective for accounting periods beginning on or after 1 April 2019. It abolished the operating-lease vs finance-lease distinction on the lessee side: every lease (with limited exceptions) now goes on the balance sheet as a Right-of-Use (RoU) asset and a corresponding Lease Liability. The standard converges with IFRS 16 and replaces Ind AS 17.

At lease commencement, the lessee measures the lease liability at the present value of unpaid lease payments, discounted using the implicit rate (if readily determinable) or the lessee's incremental borrowing rate (IBR). The RoU asset is initially measured at the lease liability plus initial direct costs, lease prepayments, and any estimated dismantling / restoration costs less any lease incentives received.

Subsequent measurement: RoU asset is depreciated on a straight-line basis (or other systematic basis representing the pattern of use) over the lease term. The lease liability accrues interest at the discount rate, and is reduced by lease payments. The P&L expense is "front-loaded" — interest is highest at the start when the liability is largest. Two practical expedients: short-term leases (≤ 12 months) and low-value asset leases (around ₹3 lakh per asset when new) can be expensed on a straight-line basis.

Worked example — 5-year office lease

A company leases office premises for 5 years with monthly rent of ₹50,000, no escalation. The lessee's incremental borrowing rate is 8% p.a.

Inputs

Lease term60 months

Monthly payment₹50,000

Total undiscounted payments₹30,00,000

Discount rate (IBR)8% p.a.

Output

Lease liability at commencement~₹24.65 L

RoU asset at commencement~₹24.65 L

Year 1 interest expense~₹1.83 L

Year 1 depreciation (SL over 5y)~₹4.93 L

Year 1 total P&L impact~₹6.76 L

Pre-Ind AS 116 P&L₹6.00 L (rent only)

Ind AS 116 front-loads the lease expense — Year 1 P&L impact (₹6.76 L) is higher than the cash lease payment (₹6.00 L). Over the 5-year term, total P&L expense equals total cash outflow (₹30 L), but the timing is different. Cash flow statement: lease payments split into principal repayment (financing activity) and interest (operating or financing — accounting policy choice).

Common mistakes

Wrong lease term — ignoring renewal options reasonably certain

Ind AS 116 para 18 — the lease term includes the non-cancellable period PLUS periods covered by an option to extend if the lessee is reasonably certain to exercise it. Many companies use only the non-cancellable period, understating both the RoU asset and the lease liability. Significant economic incentives to extend (e.g., fit-out investments) push toward "reasonably certain".

Using current borrowing rate instead of IBR

The Incremental Borrowing Rate is the rate the lessee would have to pay to borrow over a similar term and with similar security the funds necessary to obtain an asset of similar value in a similar economic environment. It is asset-specific, not the company's general borrowing rate. Different leases may have different IBRs.

Capitalising variable payments not based on an index / rate

Variable lease payments based on usage (e.g., per-km charge, turnover rent) are expensed as incurred — NOT capitalised. Variable payments based on an index or rate (e.g., CPI-linked rent) ARE included in the lease liability at initial measurement.

Not reassessing on lease modifications

If a lease is modified (term extended, payment changed, scope increased), the lessee must reassess whether the modification is a separate lease (if scope increased AND consideration adjusted to reflect standalone price) or a remeasurement (otherwise). Many companies treat modifications as new leases without proper analysis.

Forgetting RoU asset impairment under Ind AS 36

The RoU asset is within the scope of Ind AS 36 (Impairment). At each reporting date, if indicators of impairment exist (e.g., unused space, declining business), the RoU must be tested for impairment. Often missed in finalisation.

Frequently asked questions

What is Ind AS 116?+

Ind AS 116 (Leases) is the Indian Accounting Standard for lease accounting, effective for periods beginning on or after 1 April 2019. It is converged with IFRS 16. For lessees, it removes the operating-lease/finance-lease distinction — every lease (with limited exemptions) is recognised on the balance sheet as a Right-of-Use asset and a Lease Liability.

What are the lessee's recognition exemptions?+

Two: (a) Short-term leases — lease term of 12 months or less at commencement with no purchase option. The lessee can elect by class of underlying asset to recognise lease payments as an expense on a straight-line basis. (b) Leases for which the underlying asset is of low value when new (Ind AS 116 BC 100 suggests around USD 5,000 ≈ ₹3 lakh) — election made on a lease-by-lease basis.

What is the discount rate?+

The rate implicit in the lease — if readily determinable — or otherwise the lessee's incremental borrowing rate (IBR). The IBR is the rate the lessee would have to pay over a similar term and security to borrow funds to obtain an asset of similar value in a similar economic environment.

How is variable lease payment treated?+

Variable lease payments dependent on an index or rate (e.g., CPI-linked rent) are included in the initial lease liability at the index / rate prevailing at commencement, and remeasured when the cash flow changes. Other variable payments (usage-based, turnover-based) are NOT included in the lease liability — they are expensed when incurred.

How is the lessee's lease term determined?+

Non-cancellable period of the lease PLUS (a) periods covered by an option to extend if reasonably certain to exercise; (b) periods covered by an option to terminate if reasonably certain NOT to exercise. The "reasonably certain" assessment considers economic incentives — fit-outs, sub-lease arrangements, business plans.

What is the difference between Ind AS 17 and Ind AS 116?+

Under Ind AS 17, lessees classified leases as operating or finance. Operating leases had only a P&L expense (no balance sheet impact). Finance leases were capitalised. Under Ind AS 116, almost every lease is capitalised — bringing significant new balance sheet recognition for retailers, airlines, telecom, real estate users.

How is lessor accounting affected by Ind AS 116?+

Lessor accounting under Ind AS 116 is substantially unchanged from Ind AS 17 — lessors continue to classify leases as operating or finance. The main change for lessors is enhanced disclosure requirements.

What disclosures are required?+

Ind AS 116 requires extensive disclosures: total cash outflow for leases, additions to RoU assets, depreciation by class, interest expense on lease liabilities, expense for short-term leases / low-value assets / variable payments, gain or loss arising from sale and leaseback transactions, and a maturity analysis of lease liabilities. The objective is to enable users to assess the effect that leases have on financial position, financial performance, and cash flows.

Authoritative sources

Ind AS 116 — Leases — Effective FY 2019-20. ICAI has issued an Educational Material on Ind AS 116 with detailed application guidance and industry-specific FAQs.

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

Related calculators

Schedule II Depreciation →Deferred Tax Calculator →Ind AS 115 Revenue →Schedule III Validator →

Last reviewed: 2026-05-28 · For informational purposes only — not professional advice.