Commercial & Industrial Solar in India 2026 — Complete Guide
India's commercial and industrial (C&I) solar segment is growing faster than residential. With grid tariffs for industrial consumers reaching ₹7.50–₹12/unit in many states, and no cap on system size for non-residential connections, large-scale rooftop and ground-mounted solar delivers some of the best returns available.
40% Accelerated Depreciation — India's Best Solar Incentive for Businesses
Under Section 32 of the Income Tax Act, companies that install solar assets can claim 40% accelerated depreciation in the first year. This is in addition to normal depreciation and significantly reduces the net investment in year 1.
Example — 500kW Industrial System:
EPC Cost: ₹2.1 Crore | Tax Rate: 25% | 40% Depreciation on ₹2.1Cr = ₹84L | Tax Saved: ₹84L × 25% = ₹21L in Year 1
Effective Net Cost After Depreciation: ₹2.1Cr − ₹21L = ₹1.89 Crore
EPC Cost: ₹2.1 Crore | Tax Rate: 25% | 40% Depreciation on ₹2.1Cr = ₹84L | Tax Saved: ₹84L × 25% = ₹21L in Year 1
Effective Net Cost After Depreciation: ₹2.1Cr − ₹21L = ₹1.89 Crore
Financing Options for Large Solar Projects
- 100% Equity: Highest IRR (25–35%), zero interest cost. Best if company has surplus cash.
- Bank Loan (70:30): Leverage amplifies equity returns. SBI, PNB, Canara Bank offer solar term loans at 8.5–10.5%. Banks require DSCR ≥ 1.25.
- PPA (Power Purchase Agreement): Zero upfront cost — developer installs at their expense, you buy power at ₹3.50–₹5/unit (below grid rate). No depreciation benefit but no capex.
- RESCO Model: Similar to PPA but with shared savings structure. Revenue split between owner and developer.
Key Metrics Explained
| Metric | Formula | Good Benchmark (India C&I) |
|---|---|---|
| IRR | Discount rate where NPV = 0 | >18% (equity), >12% (leveraged) |
| DSCR | Net Revenue ÷ Annual Debt Service | >1.25 (bank minimum), >1.5 (comfortable) |
| LCoE | Total lifecycle cost ÷ Total lifetime generation | ₹2.50–₹4.50/unit |
| Payback | Net Cost ÷ Annual Savings | 4–6 years (equity), 3–5 years with depreciation |