Fixed Assets are long-term tangible assets that a business owns and uses to generate income over a period longer than one year. In the Indian context, these include items like land, buildings, machinery, vehicles, and office equipment that are not intended for resale but are crucial for daily operations.
Under Indian accounting standards, Fixed Assets are recorded on the balance sheet at their purchase cost, which includes the asset’s price, taxes paid, and any expenses directly related to bringing the asset into usable condition. Over time, most fixed assets (except land) depreciate in value, and this depreciation is accounted for in financial statements as per the Income Tax Act and Companies Act requirements.
For small businesses and startups in India, accurately maintaining Fixed Assets records is essential during income tax filings, applying for loans, calculating depreciation, and preparing annual accounts. Proper documentation helps ensure transparency in audits, compliance with regulatory authorities like the Income Tax Department and MCA (Ministry of Corporate Affairs), and can also play a critical role when seeking investment or funding.
When registering a company or applying for GST, businesses often need to declare major Fixed Assets. Moreover, claiming depreciation on Fixed Assets can reduce taxable income, making it a practical tax-saving tool for business owners.
To know more about how to manage and categorize your Fixed Assets effectively, make sure your accounting practices are updated and aligned with Indian compliance norms.