SolarCalculators
Need the rules behind these numbers — the 40% WDV rate, the 180-day half-year rule, additional depreciation and who can claim it? Read our guide to the solar panel depreciation rate under the Income Tax Act.
Solar Depreciation Rate as per Income Tax Act (2026)
| Item | Rate / rule |
|---|---|
| Solar power generating system (panels, inverter, structure, cabling installed as one system) | 40% per year, WDV (renewable energy devices, Appendix I of the IT Rules) |
| Put to use for less than 180 days in the year (commissioned after about 3 October) | Half rate in year 1: 20% |
| Additional depreciation, Sec 32(1)(iia) | +20% in year 1 for new plant used in manufacturing or power generation (+10% if under 180 days; the other 10% next year) |
| Companies under the new tax regime (Sec 115BAA / 115BAB) | 40% allowed, no additional depreciation |
| Standalone UPS, inverter or batteries not part of a solar system | General plant & machinery rate, 15% WDV |
| Residential solar with no business use | No depreciation claim against salary income |
Solar Depreciation Example: ₹10 Lakh Plant (40% WDV)
Full-year use from year 1, no additional depreciation, 25% tax rate:
| Year | Opening WDV | Depreciation (40%) | Tax saved (25%) | Closing WDV |
|---|---|---|---|---|
| Year 1 | ₹10,00,000 | ₹4,00,000 | ₹1,00,000 | ₹6,00,000 |
| Year 2 | ₹6,00,000 | ₹2,40,000 | ₹60,000 | ₹3,60,000 |
| Year 3 | ₹3,60,000 | ₹1,44,000 | ₹36,000 | ₹2,16,000 |
| Year 4 | ₹2,16,000 | ₹86,400 | ₹21,600 | ₹1,29,600 |
| Year 5 | ₹1,29,600 | ₹51,840 | ₹12,960 | ₹77,760 |
About 92% of the cost is written off in five years, saving about ₹2.3 lakh of tax. Enter your own figures in the calculator above.
Solar Plant Depreciation as per Companies Act
The Companies Act (Schedule II) is used for the company's books, not for tax. It works on the asset's useful life rather than a fixed rate. Most companies take a useful life of about 25 years for a solar plant (the period CERC uses for solar tariffs), which is about 3.8% a year on straight-line basis, with 5% residual value. Your auditor decides the life used, so confirm it before closing the books. Tax depreciation still follows the Income Tax Act's 40% WDV.
Understanding Solar Depreciation in India
For commercial and industrial (C&I) users, solar is not just an energy-saving asset but also a powerful tax-saving tool. Under the Income Tax Act, solar power equipment is eligible for Accelerated Depreciation.
How it works:
- Normal Depreciation: Solar assets are eligible for a 40% depreciation rate under the Written Down Value (WDV) method.
- Additional Depreciation: New industrial undertakings or power generation companies can claim an additional 20% depreciation in the first year of commissioning.
- The Half-Year Rule: If an asset is put to use for less than 180 days in a financial year (typically commissioned after October 3rd), only 50% of the eligible depreciation can be claimed in that year.
Frequently Asked Questions — Solar Depreciation
What is the depreciation rate on a solar plant as per the Income Tax Act?
Under the Income Tax Act, a solar power generating system is depreciated at 40% per year on the written down value (WDV) basis. If it is used for less than 180 days in the first year, only 20% is allowed that year. New plant used in manufacturing or power generation can claim an extra 20% additional depreciation in year 1.
Who can claim 40% depreciation on solar installations?
Businesses and commercial entities that own and use the solar plant for their business can claim it. Residential consumers with no business income generally cannot claim it against personal income tax.
How much tax can a business save using solar depreciation?
On a ₹10 lakh plant at a 25% tax rate, the 40% claim saves ₹1 lakh in year 1 and about ₹2.3 lakh over five years. At a 30% rate, year 1 saving is about ₹1.2 lakh.
Is solar depreciation calculated on WDV or straight-line basis?
For income tax, solar depreciation is on the written down value (WDV) basis, so each year's 40% is applied to the remaining value. For company accounts under the Companies Act, straight-line over the useful life (often about 25 years) is common.
What is the depreciation rate on a solar inverter?
An inverter installed as part of a solar power generating system is claimed with the system at 40% WDV. A standalone inverter or UPS not part of a solar system falls under general plant and machinery at 15%.
Can companies under Section 115BAA claim solar depreciation?
Yes, they can claim the 40% normal depreciation, but not the additional 20% depreciation under Section 32(1)(iia).