Understanding the Basic Classification
What Are Immovable Properties?
Immovable properties refer to land, buildings, flats, commercial spaces and any structure permanently attached to the earth. Unlike shares or gold, you cannot move them. Their value is tied to location, demand, and time.
Assets vs Investments what Is the Difference?
An asset is anything of economic value owned by an individual or organization. An investment, in accounting terms, is a specific category of asset one held not for daily use, but for future financial returns.
This distinction matters more than most people realize.
Where Does Immovable Property Get Classified?
When It Is Treated as a Fixed Asset
If a property is used for personal residence or for running a business such as an office building or factory it is recorded as a fixed asset under the assets side of the balance sheet. It is not held for profit. It is held for use.
In this case, the property is subject to depreciation over time, reducing its book value year after year.
When It Is Treated as an Investment
If a property is purchased with the intention of earning rental income or capital appreciation and is not used in day-to-day business operations it is classified as an investment property.
Under accounting standards like Ind AS 40 and IAS 40, investment property is separately identified and reported. It is measured either at cost or fair value, depending on the accounting policy adopted.
Why This Classification Matters
Getting this classification right has real consequences. It affects tax treatment, depreciation claims, financial reporting accuracy and even loan eligibility assessments.
For individuals filing income tax returns, immovable property held as an investment is treated differently from self-occupied or business-use property. Rental income, capital gains and indexation benefits all depend on how the property is categorized.
The Bottom Line
Investment in immovable properties is not automatically an asset or an investment its classification depends entirely on its purpose and use. Understanding this distinction helps in accurate financial planning, correct tax filing and transparent reporting.
When in doubt, consulting a chartered accountant remains the most reliable course of action.
