Fixed Asset Register and Depreciation: A Guide for Indian Firms

A fixed asset register is the detailed record of every long-term asset a business owns: machinery, vehicles, computers, furniture, buildings and intangibles. It is the backbone for calculating depreciation, proving the existence of assets during audits, insuring them correctly and recording disposals. Many Indian SMBs keep the register in an Excel file updated once a year by the CA, which works until there are hundreds of assets across several locations and two different depreciation calculations to maintain. This guide explains what a fixed asset register should contain, how depreciation works under the Companies Act and under income-tax rules, with worked examples, and how to keep the register accurate through the year.

What a fixed asset register should contain

Field	Example	Why it matters
Asset code and tag number	PM-0142	Links the register to the physical asset
Description, make and model, serial number	CNC lathe, model X, serial 88213	Identification during verification
Asset class and block	Plant and machinery	Determines useful life and tax block
Location and custodian	Unit 2, machine shop; shop manager	Accountability and verification
Supplier, invoice number and date	XYZ Machines, INV-221, 12 Jun	Evidence of cost and ownership
Date put to use	3 Aug	Depreciation start date
Cost, including capitalised expenses	₹17,40,000	Depreciable base
Useful life and residual value (books)	15 years, 5%	Companies Act depreciation
Accumulated depreciation and WDV	Per books and per tax	Balance sheet and tax computation
Disposal details	Date, proceeds, buyer	Gain or loss and block adjustment

What goes into the cost of an asset

Under AS 10 (and Ind AS 16 for Ind AS companies), the cost of property, plant and equipment includes the purchase price, import duties and non-refundable taxes, and directly attributable costs of bringing the asset to working condition: freight, installation, foundation work, professional fees and trial run costs (net of any sale proceeds from trial output, subject to the applicable standard). GST is excluded where input tax credit is available. Interest on borrowings used to acquire a qualifying asset may be capitalised as per the borrowing costs standard.

Example: a machine invoiced at ₹15,00,000 plus GST, with ₹40,000 freight, ₹1,20,000 for foundation and installation and ₹80,000 of engineer fees for commissioning. If GST credit is available, capitalised cost = ₹15,00,000 + ₹40,000 + ₹1,20,000 + ₹80,000 = ₹17,40,000.

Capital work in progress: assets not yet in use

Large projects such as a new shed, a production line or an ERP rollout may take months before the asset is ready for use. Costs accumulate in capital work in progress (CWIP), which is not depreciated. Schedule III requires companies to present a CWIP ageing schedule, and for projects that are overdue or over budget, a completion schedule. Practical rules:

• Open a separate CWIP project code for each project so costs do not mix.
• Capitalise to the register on the date the asset is ready for its intended use, splitting CWIP into individual assets with their own useful lives.
• Review CWIP every quarter; balances that do not move for a year usually signal either an abandoned project (which may need write-off) or assets in use that were never capitalised (which means depreciation has been missed).

Depreciation under the Companies Act: Schedule II

Companies depreciate assets over their useful lives. Schedule II to the Companies Act, 2013 indicates useful lives for classes of assets; a company may use different lives if justified by technical assessment and disclosed. Residual value is generally not more than 5 percent of original cost unless justified. Some commonly cited Schedule II useful lives:

Asset class	Useful life (Schedule II)
Buildings (other than factory buildings), RCC frame	60 years
Factory buildings	30 years
General plant and machinery	15 years
Furniture and fittings	10 years
Motor cars	8 years
Office equipment	5 years
Computers: end-user devices (desktops, laptops)	3 years
Computers: servers and networks	6 years

Always confirm the current schedule and any industry-specific entries with your auditor. Companies may use straight-line (SLM) or written-down value (WDV) methods. Where a significant component of an asset has a different useful life (for example, a furnace lining within a furnace), component accounting applies.

Worked example: SLM vs WDV for books

Machine cost ₹17,40,000, useful life 15 years, residual value 5 percent (₹87,000).

• SLM: annual depreciation = (₹17,40,000 minus ₹87,000) / 15 = ₹1,10,200.
• WDV: rate = 1 minus (residual / cost) raised to the power 1/15 = 1 minus (0.05)^(1/15), which is about 18.1 percent. Year 1 depreciation = ₹17,40,000 x 18.1% = ₹3,14,940.

If the machine was put to use on 3 August, depreciation for the first year is pro-rated for the days used: 241 days out of 365 under SLM gives ₹1,10,200 x 241 / 365 = about ₹72,762.

Depreciation for income tax: the block of assets method

Tax depreciation follows a different logic. Assets are grouped into blocks by type and rate, depreciation is computed on the written-down value of the whole block, and the rates are prescribed in the tax law rather than based on useful life. Key features that have long applied:

• Block of assets: individual assets lose identity for tax; additions increase the block and sale proceeds reduce it.
• Half rate for assets used for less than 180 days in the year of acquisition.
• Illustrative rates under the earlier Act: 15 percent for general plant and machinery, 40 percent for computers, 10 percent for furniture, 15 percent for most motor cars.
• Additional depreciation on new plant and machinery for eligible manufacturers, subject to conditions and the tax regime chosen.

The Income-tax Act, 2025, effective from 1 April 2026, retains depreciation on a block basis, but section numbers and the rate schedule are in the new Act. Check the current rates and conditions with your tax adviser before finalising computations.

Worked example: tax depreciation

Plant and machinery block opening WDV ₹42,00,000. The machine above (₹17,40,000) added on 3 August, put to use the same day (more than 180 days in the year). An old machine sold for ₹1,50,000. At an illustrative 15 percent rate:

Block WDV before depreciation = ₹42,00,000 + ₹17,40,000 minus ₹1,50,000 = ₹57,90,000. Depreciation = ₹57,90,000 x 15% = ₹8,68,500.

If the machine had been put to use in November (less than 180 days), depreciation on the addition would be at half rate: ₹17,40,000 x 7.5% = ₹1,30,500, with the rest of the block at 15 percent.

Why you need two depreciation books

Book depreciation and tax depreciation almost always differ, which creates deferred tax. The register must therefore track both:

Basis	Book (Companies Act)	Tax
Unit of calculation	Individual asset or component	Block of assets
Rate basis	Useful life and residual value	Prescribed rates
Year of purchase	Pro-rata by days	Full or half rate (180-day rule)
Disposal	Gain or loss per asset	Reduces block; capital gains rules in specific cases

Physical verification of fixed assets

For companies, CARO 2020 requires the auditor to report whether property, plant and equipment have been physically verified by management at reasonable intervals and whether material discrepancies were noticed and dealt with. A practical verification routine:

1. Tag every asset with a durable label or barcode linked to the register.
2. Verify high-value assets annually and all assets at least once in a three-year cycle.
3. Record found, not found, damaged, idle and location changed.
4. Investigate missing items and record disposals or write-offs with approval.
5. Update the register and file the verification report with audit papers.

Disposals, transfers and impairment

• Disposal: remove cost and accumulated depreciation, record proceeds, and recognise gain or loss in books. In tax, reduce the block by proceeds. Consider GST on the sale of used capital goods, which has specific rules for the amount payable.
• Transfer between locations or units: update location and custodian; for separate GSTINs, inter-unit transfers may be taxable supplies.
• Impairment: if an asset's recoverable amount falls below carrying amount (for example, a line idle because a product was discontinued), an impairment loss may be needed.

Common fixed asset mistakes

• Expensing capital items (a ₹3 lakh machine booked as repairs) or capitalising revenue items (routine maintenance).
• Starting depreciation from the purchase date instead of the date put to use.
• Assets fully depreciated but still in use with no record of their existence.
• Disposed assets never removed from the register.
• No reconciliation between the register and the general ledger.

Since edits to asset values and depreciation affect financial statements, they also fall under the audit trail expectations discussed in our guide to the Companies Act audit trail requirement.

Frequently Asked Questions

What is the difference between book depreciation and tax depreciation?

Book depreciation follows the Companies Act and accounting standards, based on useful life. Tax depreciation follows prescribed rates on blocks of assets. The difference creates deferred tax.

Can a company use useful lives different from Schedule II?

Yes, if supported by technical advice and disclosed in the financial statements. Residual value above 5 percent of cost also needs justification.

When does depreciation start?

From the date the asset is available for use (put to use), not the purchase or payment date.

How often should fixed assets be physically verified?

A common practice is a full cycle over one to three years, with high-value assets every year. The programme should be reasonable for the size and nature of assets.

Should small-value assets be capitalised?

Many businesses set a capitalisation threshold in their accounting policy and expense items below it. Agree the threshold with your auditor and apply it consistently.

How Fininvo Helps

Fininvo's fixed asset management covers an asset register, depreciation, barcode tracking, maintenance scheduling, transfers, disposals and compliance reports, linked to the general ledger. See pricing for plans.