Fixed Assets: Meaning, Examples & Accounting Rules

What Are Fixed Assets?

Fixed assets are things a business owns and uses for more than one year, rather than to sell: land, buildings, machinery, vehicles and computers, plus intangibles such as software licences. In Indian company accounts, physical ones show as “Property, Plant and Equipment” and the rest as “Intangible assets”, and their cost is spread over their working life through depreciation or amortisation.

The life of a fixed asset in the books Buy Rs.9,00,000 Record at cost on the asset side Depreciate Rs.57,000 a year Sell or scrap gain or loss Price plus setup Not an expense yet Over its useful life Against book value A machine’s cost does not hit profit in the year it is bought. It is spread across the years it works. Figures are from the Ballari example below.

What Counts as a Fixed Asset

The main test is purpose, not price. An item counts when the business keeps it to use for more than a year.

Type	Examples	Depreciated?
Land	Plot under a factory or shop	No
Buildings	Shop, godown, office	Yes
Machinery	Presses, ovens, generators	Yes
Fittings	Racks, counters, furniture	Yes
Vehicles	Delivery van, tempo	Yes
Computers	Billing PCs, servers	Yes
Intangible	Software, licences, trademarks	Yes, as amortisation

The same object can sit on either side of the line. A refrigerator is a fixed asset for a restaurant and stock for the appliance dealer who sells it.

Spending on an existing asset needs the same test. Repainting a godown is an expense, while adding a mezzanine floor that increases its capacity is added to the asset’s cost. Keeping the register of what you own, where it sits and who uses it is asset management, a related but separate job.

Fixed Assets vs Current Assets

Aspect	Fixed	Current
Held for	Use over many years	Sale or use within a cycle
Examples	Machinery, vehicles, land	Stock, customer dues, cash
Value drop	Through depreciation	Through sale or use
Cash tied up	For years	For weeks or months

The difference matters to a lender. A bank will fund machinery with a term loan repaid over years, while stock and customer dues are funded by a working capital limit.

Fixed Assets Example

A partnership firm running a printing press in Ballari, Karnataka, bought an offset machine from a Sivakasi maker in September 2025. It claims GST input tax credit, so tax paid on the purchase does not form part of cost.

Item	Amount	Treatment
Price	Rs.8,43,600	Added to cost
Freight	Rs.19,800	Added to cost
Installation	Rs.31,350	Added to cost
Trial run	Rs.5,250	Added to cost
Total cost	Rs.9,00,000	Sum of the four rows above, shown under assets
GST paid	Rs.1,51,848	Claimed as input tax credit
AMC	Rs.14,500	Expense each year (maintenance contract)
Training	Rs.6,000	Expense, not cost

Note: this is an invented example for illustration only.

The firm expects the machine to last 15 years with a 5% scrap value. On the straight-line method, depreciation comes to Rs.57,000 a year, which this depreciation calculator can confirm.

Straight-line depreciation = (Cost minus scrap value) ÷ useful life = (Rs.9,00,000 minus Rs.45,000) ÷ 15 = Rs.57,000

Each full year, that Rs.57,000 is booked through a journal entry (the first year counts only from the month of use), and the machine’s book value drops by the same amount.

What Indian Rules Say About Cost and Depreciation

AS 10, the accounting standard on property, plant and equipment, decides what goes into cost. Purchase price, freight, installation and testing are included. Staff training, general admin costs and recoverable taxes are not, which is why the Ballari firm’s cost stops at Rs.9,00,000 and leaves out its Rs.1,51,848 GST and its operator training.

Depreciation then follows two separate tracks:

In the books: companies use the useful lives in Schedule II of the Companies Act, 2013 as a guide, and other businesses follow AS 10 with their own estimate of life
For income tax: assets are grouped into blocks with fixed written-down-value rates, and an asset bought and used for under 180 days in its first year gets half the rate, a rule the Income-tax Act, 2025 keeps

So the book figure and the tax figure almost never match. This guide to depreciation methods compares them side by side.

GST has two branches worth knowing. Credit on most machinery is allowed, but credit on a passenger car with up to 13 seats is blocked for most businesses, as is credit on constructing a building. And if you claim depreciation on the GST portion of an asset’s cost, you cannot also claim that GST as credit.

Across the businesses we work with at Petpooja, the costliest slip is small: a laptop or a costly billing printer booked as an expense one year, then missing from the asset list when an auditor asks for it the next.

See Every Asset on Your Balance Sheet

An asset only stays visible if the purchase lands in the right account from day one. For retail businesses, Petpooja Invoice lists Chart of Accounts, Journal Entry Reports and Balance Sheet among its plan features, so the machine you bought in September is still there on the balance sheet in March.

Pick your three costliest purchases from last year and check whether each one sits under assets or was booked as an expense.

Frequently Asked Questions

Is land a fixed asset?

Yes. Freehold land is not depreciated because it does not wear out, though leasehold land is written off over the lease period.

Is a fixed asset the same as a non-current asset?

Not exactly. Fixed assets are one part of non-current assets, which also include long-term investments, long-term deposits and loans given for more than a year.

Can I claim GST input tax credit on fixed assets?

In most cases, yes, for assets used in a taxable business. Credit on passenger cars with up to 13 seats and on constructing a building is blocked, with limited exceptions, and you lose the credit if you also depreciate the GST amount.

What is the minimum value for a fixed asset?

Indian law sets no minimum. Many businesses fix their own limit, such as Rs.5,000, and expense smaller items in the books, though income tax may still treat such an item as a capital asset.

Fixed Assets