Why Commercial Solar ROI Outperforms Residential
Commercial and industrial solar systems in India offer significantly better financial returns than residential installations for three key reasons: higher electricity tariffs (₹8–₹14/kWh for commercial vs ₹5–₹9/kWh residential), larger system sizes enabling economies of scale, and the 40% accelerated depreciation benefit available only to businesses under Section 32 of the Income Tax Act.
The 40% Accelerated Depreciation Advantage
Under the IT Act, businesses can claim 40% of the solar system's value as depreciation in the very first year. For a company in the 25% tax bracket with a ₹50 lakh solar installation, this translates to ₹5 lakh in Year-1 tax savings alone — effectively reducing the net system cost by 10% before a single unit of electricity is generated. Over time, the remaining 60% is depreciated in subsequent years, providing sustained tax benefits.
Demand Charge Reduction
Large commercial consumers typically pay a fixed "demand charge" based on their sanctioned contracted demand (in kVA or kW). Installing solar reduces actual grid consumption during peak daytime hours, which can potentially allow businesses to downgrade their sanctioned demand contract at the next annual revision — providing an additional fixed monthly saving that compounds over the system's lifetime.