🌞Claim 60% Solar Depreciation and Save Big on Business Taxes

Solar energy isn’t just about reducing your electricity bills — it’s also a powerful tool for saving on income tax. If you’re a Commercial or Industrial (C&I) user, the Indian government offers a major financial incentive under the Income Tax Act, Section 32, that allows you to claim up to 60% depreciation on your solar plant investment in the very first year.

📜 Legal Framework Under Section 32 of Income Tax Act

Solar plants qualify under:

  • Section 32(1)(ii) – for normal depreciation

  • Section 32(1)(iia) – for additional depreciation (only for manufacturers)

  • Asset Category: Plant & Machinery

  • Classification: Renewable Energy Devices

  • Schedule: Serial No. 13(x) – Solar Power Generating Systems

Conditions to Claim Accelerated Depreciation

To avail the 40% or 60% depreciation, the following conditions must be met:

ClauseCondition
OwnershipThe asset (solar plant) must be owned by the assessee. Leased or rented systems are not eligible.
UsageThe solar plant must be used for business or professional activity during the financial year.
New AssetThe asset must be new, not second-hand or reinstalled.
Put to UseIt must be installed and operational before 31st March of the financial year.
September RuleIf commissioned after 30th September, only 50% of eligible depreciation can be claimed that year.
Additional Depreciation (20%)Only manufacturing units (or companies engaged in power generation) are eligible for this, and only for new plant & machinery.

💰 How Much Tax Can You Actually Save?

Let’s say you install a solar plant worth ₹1 crore.

🎯 Key Assumptions:

  • Tax Slab: 30%

  • Depreciation Method: Written Down Value (WDV)

  • Commissioned before 30th September

  • Owned & newly purchased system

🏢 A. For a Non-Manufacturer (Eligible for 40% Depreciation)

YearDepreciation (40%)Asset Value RemainingTax Saving @30%
1₹40,00,000₹60,00,000₹12,00,000
2₹24,00,000₹36,00,000₹7,20,000
3₹14,40,000₹21,60,000₹4,32,000

📊 Total Tax Saving in 3 Years = ₹23,52,000

🏭 B. For a Manufacturer (Eligible for 60% Depreciation in Year 1)

YearDepreciation (40% + 20%)Asset Value RemainingTax Saving @30%
1₹60,00,000₹40,00,000₹18,00,000
2₹16,00,000₹24,00,000₹4,80,000
3₹9,60,000₹14,40,000₹2,88,000

📊 Total Tax Saving in 3 Years = ₹25,68,000

Summary of Benefits

FeatureNon-ManufacturerManufacturer
Eligible Depreciation (Year 1)40%60%
Income Tax Slab30%30%
Year 1 Tax Saving₹12 Lakhs₹18 Lakhs
Total Tax Saving (3 Years)₹23.52 Lakhs₹25.68 Lakhs
Faster Payback✅✅

Impact of Post-September Installations

If your solar plant is commissioned after 30th September, only 50% of depreciation (i.e., 20% or 30%) can be claimed in Year 1.

For example:

  • Manufacturer installing after 30th Sept can only claim 30% in Year 1 instead of 60%.

  • The balance continues in future years, delaying the tax savings.

🚀 Key Advantages to Your Business

BenefitExplanation
💸 High Initial Tax ShieldClaim up to ₹18 Lakhs tax savings in Year 1 alone.
📈 Improved Cash FlowLower tax outgo frees up funds for reinvestment.
🧾 Faster Payback PeriodDepreciation benefit adds to overall project ROI.
🏢 Applicable to C&I UsersWhether SME or large enterprise, AD is available to all eligible businesses.

🧠 Final Thought

Accelerated Depreciation is a legally backed, government-supported incentive that can reduce your tax burden dramatically. If your business is in the 30% tax bracket, this alone can recover 25–27% of your solar investment within just 3 years.

Pro Tip: Always ensure the plant is owned, new, and commissioned before 30th September to maximize benefits.

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