What Is Accelerated Depreciation for Solar?
Under Section 32 of the Income Tax Act, businesses can claim depreciation on assets used for income generation. Solar power plants — including rooftop and ground-mounted systems — fall under Plant and Machinery and qualify for 40% Written Down Value (WDV) depreciation per annum as of FY2025-26.
Prior to the new tax regime changes, solar had an 80% accelerated depreciation rate. This was revised to 40% — still significantly higher than the 15% standard rate for general plant and machinery, making solar one of the most tax-efficient capital investments for Indian businesses.
Depreciation Rates — Solar Assets (FY2025-26)
| Asset | IT Act Category | Depreciation Rate |
|---|---|---|
| Solar PV panels | Plant & Machinery (Block 6) | 40% |
| Solar inverter (grid-tied / hybrid) | Plant & Machinery | 40% |
| Solar battery storage | Plant & Machinery | 40% |
| Mounting structure (galvanised steel) | Plant & Machinery | 15% (structure) |
| Balance of System (cables, combiner box) | Plant & Machinery | 15–40% |
| General Plant & Machinery | Block 3 | 15% |
Note: Mounting structures are sometimes grouped with the plant (40%) when part of an integral solar installation. Consult your CA for asset classification specific to your invoice/installation type.
How Is Solar Depreciation Calculated? (WDV Method)
India uses the Written Down Value (WDV) method — depreciation is calculated on the reduced book value each year, not on the original cost. Here's how it works for a ₹5 lakh solar plant at 40%:
| Year | Opening WDV (₹) | 40% Depreciation (₹) | Closing WDV (₹) | Tax Saved* (₹) |
|---|---|---|---|---|
| Year 1 | 5,00,000 | 2,00,000 | 3,00,000 | 60,000 |
| Year 2 | 3,00,000 | 1,20,000 | 1,80,000 | 36,000 |
| Year 3 | 1,80,000 | 72,000 | 1,08,000 | 21,600 |
| Year 4 | 1,08,000 | 43,200 | 64,800 | 12,960 |
| Year 5 | 64,800 | 25,920 | 38,880 | 7,776 |
| 5-Year Total | — | 4,61,120 | 38,880 | 1,38,336 |
*Tax saved assumes 30% tax bracket. Actual savings depend on your tax slab and applicable surcharges.
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Who Can Claim Solar Depreciation?
| Entity Type | Can Claim Solar Depreciation? |
|---|---|
| Sole Proprietorship / Partnership Firm | ✅ Yes — if solar system is used for business |
| Private Ltd / LLP | ✅ Yes — standard company depreciation rules apply |
| HUF (Hindu Undivided Family) | ✅ Yes — if income from business/profession |
| Salaried Individual (residential solar) | ❌ No — individuals cannot claim depreciation on personal assets |
| Rental Property Owner (commercial solar) | ⚠️ Consult CA — may be claimable as capital expenditure on income-producing property |
Half-Year Convention for Solar Depreciation
Under the Income Tax Act, if an asset is put to use for less than 180 days in the year of purchase, only 50% of the applicable depreciation rate is allowed in Year 1. For example, a solar system commissioned after 1 October (financial year starts 1 April) would get only 20% depreciation (50% of 40%) in Year 1, and 40% from Year 2 onwards.
Plan your commissioning date to maximise depreciation — systems commissioned before 30 September get the full 40% in Year 1.
Depreciation vs PM Surya Ghar Subsidy — Can You Claim Both?
If you avail the PM Surya Ghar subsidy (₹30,000–₹78,000), the depreciation base should typically be the net cost after subsidy — since the subsidy is a capital receipt reducing the asset's cost. However, the treatment of government grants vs depreciation base is nuanced and depends on accounting standard applied (IndAS 20 / AS 12). Always consult a CA for the correct treatment in your specific case.
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- GST invoice from the solar installer (showing itemised cost: panels, inverter, mounting, installation)
- Commissioning certificate / handover report
- Net metering approval letter from DISCOM (proves plant is operational)
- Grid export data / generation log
- CA certificate (for audit purposes in larger installations)