A Fixed Asset Register Your Auditor Will Accept: Fields, Tags and Physical Verification
Keep one line per asset with a tag number, description, cost, date put to use, location, custodian, useful life and depreciation. Under CARO 2020 clause 3(i), auditors report whether these records show quantities and location, and whether management physically verified the assets at reasonable intervals. Record every sale or write-off in both the books and the tax block.
Most small companies have a "fixed asset register" that is really a depreciation schedule: a list of totals by category. It works until the auditor asks where the ₹6 lakh lathe bought in 2021 is, and nobody knows whether it was sold, scrapped or moved to the other plant. This post covers what the audit rules require, the fields that matter and how to keep the register in step with the books and the tax block.
What CARO 2020 asks
Clause 3(i) of the Companies (Auditor's Report) Order, 2020 makes the auditor report on property, plant and equipment (PPE). The parts that matter for the register:
| Sub-clause | What the auditor reports |
|---|---|
| 3(i)(a)(A) | Whether the company keeps proper records showing full particulars, including quantitative details and situation (location) of PPE |
| 3(i)(a)(B) | Whether proper records of intangible assets are kept |
| 3(i)(b) | Whether PPE has been physically verified by management at reasonable intervals, whether material discrepancies were found, and whether they were properly dealt with in the books |
| 3(i)(d) | Whether PPE or intangibles were revalued, whether a registered valuer did it, and any change of 10% or more in a class |
The duty to verify sits with management. The duty to report sits with the auditor. Skipping verification does not avoid the clause; it just produces an adverse remark.
Who is outside CARO. Banking and insurance companies, Section 8 companies, one person companies, small companies, and private companies that are not a holding or subsidiary of a public company and have paid-up capital plus reserves up to ₹1 crore, bank borrowings never above ₹1 crore in the year, and revenue up to ₹10 crore. Even if you are exempt, a register is still the only way to support the depreciation figure in your accounts.
The fields a register needs
| Field | Why |
|---|---|
| Asset tag number | Links the physical item to the line |
| Description, make, model, serial number | Identifies the item without guesswork |
| Category (Schedule II class) and tax block | Drives book and tax depreciation |
| Supplier, invoice number, date | Proves cost and ownership |
| Cost, including freight and installation | The depreciable base |
| Date put to use | Starts depreciation |
| Location and custodian | The "situation" CARO asks about |
| Useful life and residual value | Book depreciation under Schedule II |
| Accumulated depreciation and book value | Ties to the balance sheet |
| Status and disposal details | Sold, scrapped, lost, transferred |
Under Schedule II of the Companies Act, 2013, residual value is generally not more than 5% of cost, useful lives come from Part C unless you justify a different one, and a significant component with a different life is depreciated separately. Additions and disposals during the year are depreciated pro rata to the date.
Tagging and physical verification
- Tag everything above your capitalisation threshold. Use durable labels or metal plates with the register's tag number. Record the tag in the register the day the asset is received.
- Set a cycle. CARO does not fix a frequency; it asks for "reasonable intervals" given the company's size and the nature of its assets. A common approach is all assets once a year, or one-third of the register each year with high-value and portable items every year.
- Count from the floor to the register and from the register to the floor. The first finds assets missing from the register; the second finds register lines with no asset.
- Document the count. Date, team, locations covered, items found, items missing, and sign-off by the custodian.
- Deal with discrepancies in the books. Missing items are written off or investigated; found items are added. The auditor reports whether this was done.
Disposals: books and tax block
A sale or scrapping must be recorded in three places: the register, the books and the income-tax block.
- ✓Books. Depreciate up to the date of sale, remove cost and accumulated depreciation, and take the difference between sale price and book value to profit or loss.
- ✓Tax. Depreciation under the Income-tax Act, 2025 (Section 33, earlier Section 32 of the 1961 Act) works on blocks of assets. The sale price reduces the block. A gain arises only if sale proceeds exceed the block's value, or the block is left with no assets.
- ✓GST. Selling a used asset on which you took input credit is a taxable supply. Check the credit-reversal rule before invoicing.
A worked example
A Ludhiana auto-parts company does its first full verification in early October 2026 and finds a lathe still on the register that was sold on 30 September 2026 to a local workshop for ₹3,20,000.
Book side (Schedule II, straight line)
| Item | Figure |
|---|---|
| Cost (put to use 1 April 2021) | ₹6,00,000 |
| Residual value (5%) | ₹30,000 |
| Annual depreciation: (₹6,00,000 − ₹30,000) ÷ 15 years | ₹38,000 |
| Accumulated to 31 March 2026: 5 years × ₹38,000 | ₹1,90,000 |
| April to September 2026: ₹38,000 × 6 ÷ 12 | ₹19,000 |
| Book value at sale: ₹6,00,000 − ₹2,09,000 | ₹3,91,000 |
| Sale price | ₹3,20,000 |
| Loss on sale | ₹71,000 |
Tax side. The plant and machinery block (15%) opened the tax year at ₹42,00,000 with no additions. The sale reduces it to ₹42,00,000 − ₹3,20,000 = ₹38,80,000. Tax depreciation for the year is 15% × ₹38,80,000 = ₹5,82,000. There is no separate loss for tax, because the block still has assets.
The company also found two laptops missing at the Pune sales office. Their book value of ₹18,400 was written off and noted in the verification report, which is exactly what clause 3(i)(b) looks for.
Frequently asked questions
Does the register have to be in software?
No. A spreadsheet can work for a small company, but it must hold every field above and be kept up to date. Software helps when assets move between locations.
Is tagging mandatory?
No law requires labels. But without tags, physical verification against the register is guesswork, and CARO asks about verification.
What about assets at a job worker's or customer's site?
Record the location and get a written confirmation from the third party during verification.
Do proprietors and firms need a register?
Not under CARO, but income-tax depreciation still needs records of each block, and lenders often ask for an asset list.
Sources
- ✓Income-tax Act, 2025, full text (section 33, depreciation), Income Tax Department
- ✓Property, plant and equipment under CARO 2020, Taxmann
- ✓Applicability of CARO 2020, Taxmann
- ✓Depreciation under Schedule II of the Companies Act, 2013, TaxGuru
This is a summary, not legal advice. Confirm the CARO text on the MCA website and your depreciation figures with your statutory auditor.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
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