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MSME Solar Depreciation & Tax Benefit Calculator

Calculate your exact 40% accelerated depreciation tax savings on solar panel investment under the Income Tax Act. Ideal for MSMEs, companies, and businesses.

Guide to Section 32 Accelerated Depreciation for Solar

Under Section 32 of the Income Tax Act of India, businesses investing in renewable energy like solar power plants can claim an accelerated depreciation of 40% (Written Down Value method) as they fall under "Plant & Machinery". This acts as a powerful financial incentive, allowing companies to recover a large portion of their initial capital expenditure (CAPEX) in the early years through significant tax savings.

For MSMEs and corporate entities, combining the accelerated depreciation with standard state or MNRE subsidies (if applicable) can reduce the effective cost of a commercial solar installation by up to 50-60%. If the solar system is put to use in the first half of the financial year (before October 4), the full 40% rate applies in the first year. If commissioned in the second half, a 20% rate is applicable for the first year, with the remaining balance rolling over.

CAPEX vs OPEX/RESCO Models

To claim this tax benefit, you must own the solar asset on your balance sheet, meaning the CAPEX (Capital Expenditure) model is required. Under an OPEX (Operational Expenditure) or RESCO model where a third-party developer owns and maintains the panels on your roof, the developer claims the depreciation, and you only pay for the discounted electricity consumed.

Frequently Asked Questions

What is the depreciation rate for solar panels in India?

As per Section 32 of the Income Tax Act, solar power generation systems (Plant & Machinery) qualify for an accelerated depreciation rate of 40% on Written Down Value (WDV) basis in India. It is much higher than the standard 15% rate for general plant machinery.

Who is eligible for 40% accelerated depreciation on solar?

Any commercial, industrial, or MSME entity that invests in a solar plant and uses the generated power for business purposes is eligible. The asset must be capitalised in the books of the business to claim the benefit.

Can I claim depreciation if I get MNRE subsidy too?

Yes, but you can only claim depreciation on the net cost of the solar plant after deducting the subsidy amount. For example, if a plant costs ₹10 lakh and subsidy is ₹2 lakh, the depreciation is calculated on the remaining ₹8 lakh.

What documents are needed to claim solar depreciation?

You typically need the tax invoice for the solar plant, a commissioning certificate or net-metering report proving the plant is operational, and payment proofs. It should be appropriately added to the block of assets under Plant & Machinery in your IT filings.