Business compliance keeping you awake?
Cleartax's wide range of compliance services is here for you
Explore Now

Indemnity Agreement

Updated on: Oct 12th, 2021

|

5 min read

Indemnity refers to an obligation by a person to provide compensation for a particular loss or damage suffered by another person. In a literal sense, indemnity refers to security against loss. The person who is obligated to pay a compensation is called an indemnitor and the person receiving becomes an indemnitee.

Let us understand indemnity better with this example: Ajay resides at Mr. Sharma’s property on rent. As a tenant, during the time of making rent agreement, Ajay would have agreed to indemnify the landlord from costs or damages associated with his stay. At the same time, the landlord takes responsibilities to anything that could be potentially dangerous. When the contract is over and Ajay decides to relocate to another city. During his stay in Mr. Sharma’s property, two of the ceiling fans and three switchboards were damaged. Also, the paint of the house was damaged. So in this case, Ajay, while vacating the house, has to pay a compensation towards the ceiling fans, switchboards and paint cost to the landlord.

Contract of Indemnity is governed by Chapter VIII of the Indian Contract Act of 1872. Contract of Indemnity refers to when one party promises to save the other from loss caused by him by the contract promisor himself, or by the conduct of any other person. For a contract of indemnity, there are two parties, and both the parties should agree that the promisor should save the promisee from any kind of loss.

This said, the indemnity holder has certain rights that he can exercise, according to Section 125. They are:

  • The right to recover any amount compelled to pay is held by the indemnity holder.
  • The indemnity holder also is entitled to recover any cost which he might have to pay any third party
  • If the indemnity holder has paid any sum under any suit or compromise (provided it was not a contrary to the instruction of the indemnifier), he holds the right to recover that said amount
inline CTA
Get an expert at affordable price
For ITR, GST returns, Company Registration, Trademark Registration, GST Registration

Public Discussion

Get involved!

Share your thoughts!

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption