About the Accelerated Depreciation
Accelerated depreciation (AD) lets an Indian business write off a large share of a solar asset's cost in the first years, cutting taxable profit and generating a substantial year-one tax shield. Solar assets qualify for 40% written-down-value depreciation under the Income Tax Act, plus additional depreciation for eligible manufacturers.
Formula
Year-1 tax saving = Asset cost × Depreciation rate × Tax rate
- Asset cost
- Capitalised cost of the solar plant (₹)
- Depreciation rate
- 40% WDV (plus 20% additional depreciation for eligible new plant)
- Tax rate
- The company's effective corporate tax rate
How to calculate it
- 1Capitalise the solar plant cost as plant & machinery.
- 2Apply 40% written-down-value depreciation in year one (a business using the asset over 180+ days claims the full rate; under 180 days, half).
- 3Add the 20% additional depreciation under Section 32(1)(iia) if you are an eligible manufacturer.
- 4Multiply the depreciation claimed by your tax rate for the tax saved, and repeat on the reducing balance in later years.
Worked example
A business installs a ₹1 crore solar plant. At 40% WDV it depreciates ₹40 lakh in year one; at a ~25% effective tax rate that is a ₹10 lakh tax saving in the first year alone, with further reducing-balance benefits thereafter.
What you can calculate
- 40% AD benefit
- Tax rate modeling
- Effective CAPEX
- Year-wise savings
Standards & references
Frequently asked questions
What is the accelerated depreciation benefit for solar?
Solar plant & machinery qualifies for 40% WDV depreciation, letting a taxpaying business recover a large part of the cost as a tax deduction in the early years. Combined with the ~25% corporate tax rate, it materially shortens the effective payback for C&I solar.
Is the solar AD rate still 80%?
No. The 80% rate applied before FY 2017-18; it was reduced to 40% WDV from 1 April 2017. Eligible manufacturers can still add 20% additional depreciation in the first year on new plant & machinery, so the year-one benefit can reach 60%.
You might also need
ROI Calculator
Calculate return on investment with 25-year projections, NPV, and IRR analysis
OpenSavings Calculator
Calculate monthly and annual savings with net metering and grid export benefits
OpenNet Metering Calculator
Analyze grid export benefits and understand net metering impact on your savings
OpenFinancing Options
Compare loan, lease, and purchase options with interest rates and tax benefits
OpenLCOE Calculator
Levelized Cost of Energy over 25 years with degradation, WACC, and grid parity check
OpenIRR Calculator
Internal Rate of Return with annual cashflow, NPV sensitivity, and hurdle rate check
Open