Financial & Tax Advisory

Section 32 Accelerated Depreciation: 40% Year-1 Tax Shield for Businesses

While direct PM Surya Ghar DBT subsidies apply to domestic consumers, Indian enterprises, manufacturing plants, and hospitals can claim 40% Accelerated Depreciation (AD) under the Income Tax Act to write off substantial solar capital expenditures.

40% Accelerated Depreciation
Corporate Tax Savings
Accelerated ROI Calculation
INCOME TAX ACT, 1961

How Section 32 Accelerated Depreciation Works

Under Section 32(1)(ii) of the Income Tax Act, commercial enterprises and manufacturing units that invest in renewable energy assets (specifically solar photovoltaic power plants) are entitled to an Accelerated Depreciation (AD) rate of 40% on a Written Down Value (WDV) basis in the first financial year of commissioning.

Commissioned Before Oct 1 (Full Rate):

If the solar plant is commissioned on or before September 30 of the financial year (>180 days of operation), the full 40% depreciation can be claimed in Year 1.

Commissioned After Oct 1 (Half Rate):

If commissioned after October 1 (<180 days), 20% is claimed in Year 1, with the remaining balance rolling over to Year 2.

FINANCIAL CASE STUDY

Financial Model: 100 kWp Plant (₹50 Lakh CAPEX)

Assumed corporate tax bracket: 25.17% (inclusive of standard surcharge and health/education cess for Indian domestic companies):

  • Gross Solar Capital Expenditure: ₹ 50,00,000
  • Year 1 Depreciation Claim (40%): ₹ 20,00,000 (written off taxable profit)
  • Direct Corporate Tax Saved in Year 1 (25.17% of ₹20L): ₹ 5,03,400
  • Year 2 Depreciation Claim (40% of remaining ₹30L WDV): ₹ 12,00,000
  • Direct Corporate Tax Saved in Year 2 (25.17% of ₹12L): ₹ 3,02,040
  • Cumulative 3-Year Direct Tax Shield: ₹ 9,87,000+ (~20% of Project Cost!)
  • Annual Electricity Bill Savings (100 kWp @ ₹8.50/unit JBVNL): ₹ 12,41,000 / year
  • Combined Effective Payback Period: Under 2.8 Years!
GOODS & SERVICES TAX

GST Input Tax Credit (ITC) on Solar Power Equipment

Commercial and manufacturing GST-registered entities can claim 100% Input Tax Credit (ITC) on the GST paid for solar panels, on-grid inverters, structure materials, and EPC installation services, offsetting output GST liabilities on finished goods.

COMMERCIAL SOLAR ADVISORY

Schedule a Commercial Solar Feasibility & Tax Audit

Our EPC engineers and financial analysts will audit your factory or commercial complex in Jharkhand, calculating exact HT net-metering yields, 40% AD schedules, and turnkey cost proposals.

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