Accelerated Depreciation on Solar in India: How a Business Recovers the Cost Faster

What accelerated depreciation means

Depreciation is the deduction a business takes each year for the wear of an asset it owns. Ordinary plant and machinery is written off at 15% a year on the written-down value. Renewable-energy devices, including solar power generating systems, are allowed a much higher rate: 40% a year on WDV. Because the deduction lowers taxable profit, the plant pays back part of its own cost through tax savings in the first few years.

What changed in April 2026: the Income-tax Act, 2025

India's new Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. It uses the idea of a "tax year" and renumbers the sections: the depreciation provision that was Section 32 now sits elsewhere in the new Act (reported as Section 34). Tax commentators report that the depreciation schedule for renewable-energy devices, including the 40% rate for qualifying solar assets, continues.

Who can claim it

• The owner of the plant, using it for business: a factory, warehouse, hospital, school run as a business, tea estate or commercial building.
• Not the consumer in an OPEX, RESCO or PPA arrangement, where the developer owns the plant and claims the depreciation itself.
• Not households, which do not compute business income on their homes; for them PM Surya Ghar's subsidy is the support.

That is the single biggest financial difference between owning a plant (CAPEX) and buying its power (OPEX). See CAPEX vs OPEX solar.

Worked example: a Rs 1 crore plant

Assume a company installs a plant costing Rs 1 crore (net of any input tax credit), puts it to use early in the year (more than 180 days), and pays tax at an effective 25.17% (the 22% concessional corporate rate plus surcharge and cess).

Roughly a fifth of the plant's cost comes back as tax saved within five years, on top of the savings on the power bill. If the plant is commissioned late in the year and used for less than 180 days, year one's deduction halves to Rs 20 lakh and the rest carries forward in the WDV.

Putting it together with GST and power savings

For a business owner, the full picture of a solar plant's return has three parts:

1. Power savings: every unit generated replaces a unit bought from the grid at your commercial or industrial tariff.
2. Tax savings: 40% WDV depreciation reduces tax in the early years.
3. Lower upfront cost: GST on solar equipment is 5% and, for most businesses, recoverable as input tax credit (see GST on solar).

With all three, payback for a well-sited C&I plant is often in the range of three to five years, after which the plant keeps generating for two decades more.

Frequently asked questions

Sources

1. Taxguru: Depreciation under the Income-tax Act, 2025
2. pv magazine India, 4 Sep 2025: GST on solar cells, modules cut to 5%

This guide explains public policy in plain language for planning purposes. Rules, rates and deadlines change: confirm the current position with the notifying authority, your DISCOM and your tax adviser before you commit. Last checked 11 Oct 2026.