Accelerated Depreciation on Solar 2026: Tax Savings Guide

Accelerated Depreciation (AD) on solar is the single largest financial lever available to commercial and industrial buyers in India in 2026 — and it is the lever most often left half-pulled. Under Section 32 of the Income Tax Act, 1961, read with Appendix I of the Income Tax Rules, a solar power plant qualifies for a 40% Year-1 depreciation rate on the Written Down Value (WDV) method, with the balance written off over the subsequent three to four years. For a 1 MW industrial plant costing ₹3.5 crore, that translates into a ₹1.4 crore Year-1 deduction and roughly ₹42 lakh of tax saved at the 30% slab — money that lands back in the company’s hands before the first full year of generation is complete.

This guide is written for CFOs, finance controllers, and promoter-owners of CAPEX-route solar projects. It walks through the statutory basis, two fully worked examples (100 kW commercial and 1 MW industrial), Minimum Alternate Tax (MAT) treatment, the Income Computation and Disclosure Standards (ICDS) reconciliation, the documentation set your Chartered Accountant will demand at audit, and the eight errors that cause solar AD claims to be disallowed at scrutiny.

Direct answer. Commercial and industrial buyers in India can claim 40% Accelerated Depreciation on solar plant cost in Year 1 under Section 32 of the Income Tax Act, with the residual 60% written off on WDV across Years 2–4. A 100 kW system at ₹40 lakh yields a ₹16 lakh Year-1 deduction and ₹4.8 lakh tax saving at 30%. A 1 MW plant at ₹3.5 crore yields a ₹1.4 crore deduction and ₹42 lakh saving. AD applies only on CAPEX, plant commissioned before 31 March.

If your project is on a CAPEX route and your books will be audited under Section 44AB, this is the most important tax planning conversation you will have in 2026. Read on for the full mechanics.

What Accelerated Depreciation Means for Solar Buyers

For a finance team, Accelerated Depreciation is a non-cash deduction that reduces taxable income in the year the solar asset is capitalised. The Indian tax code allows ordinary plant and machinery a depreciation rate of 15% on the WDV basis. Solar, classified as a “renewable energy device” under Appendix I to the Income Tax Rules, 1962, gets a preferential 40% WDV rate — the “accelerated” component.

The legislative chain runs through three documents. Section 32(1)(ii) of the Income Tax Act, 1961 grants depreciation on plant and machinery owned by the assessee and used for business or profession. Rule 5 of the Income Tax Rules, 1962 fixes the rates. Appendix I, Part A, Block of Assets 8(ix)(l) lists “Solar power-based devices” at 40%. Until Assessment Year 2017–18 the rate was 80%; the Finance Act 2017 reduced it to 40% with effect from AY 2017–18 onwards, and that 40% remains the operative figure through 2026.

The cash impact is meaningful because it lands early. A company in the 30% slab investing ₹1 crore in solar can shrink its taxable income by ₹40 lakh in Year 1 — saving ₹12 lakh in tax outflow. That ₹12 lakh is real cash retained by the business, used to either accelerate loan repayment or reinvest. Combined with the operating cost savings from displaced grid power (₹8–₹12 per unit avoided), the effective payback on a well-engineered commercial system in 2026 compresses to 3.0–3.8 years — versus 4.5–5.5 years without claiming AD.

AD is not a subsidy. It is a tax deferral and partial reduction. The Net Present Value of the depreciation shield is positive because money saved today is worth more than money paid later, and because the lower MAT rate (15%) on book profits also benefits when AD reduces tax-book income. The next sections work through every angle.

The 5-Step AD Tax Optimisation Path for Solar

This is the framework we apply with our CAPEX clients. Each step is sequential — skipping one breaks the next. The objective is to land the 40% Year-1 deduction cleanly, defend it under audit, and capture the residual 60% over Years 2 to 4 without ICDS reconciliation drama.

Step 1 — Pre-Purchase Tax Position Diagnosis

Before signing the EPC contract, the finance team should map the company’s tax position for the financial year in which the plant will commission. Three numbers decide whether AD is worth claiming aggressively, claiming partially, or deferring. First, the projected taxable income before AD — if your business is already running a tax-book loss, a large AD claim creates an unabsorbed depreciation that carries forward indefinitely under Section 32(2) but defers your cash benefit. Second, the projected book profit under Companies Act, 2013 — this drives MAT under Section 115JB at 15% (plus surcharge and cess). Third, the existing block-of-assets WDV at the start of the year — solar enters Block VIII “Plant and Machinery — 40% rate” and the entire block is depreciated together; if there are other 40% assets already, the calculation pools them.

For a profitable company with ₹3 crore+ taxable income at the 25.17% slab (new manufacturing regime) or 30% slab (older regime), claiming the full Year-1 AD is almost always optimal. For a company expecting a loss year, deferring commissioning to the next FY can be the better move — install in March of FY-1 but commission in April of FY, capturing AD in the year when taxable income is projected. The half-year rule (Section 32(1)(ii) proviso) is the trap to avoid: if the plant is “put to use” for less than 180 days in the year of acquisition, only 50% of the 40% rate (i.e. 20%) is allowed. So a plant commissioned after October 1 captures only 20% Year-1; before October 1 captures the full 40%.

Step 2 — In-Year Capitalisation and Asset Tagging

Once the plant is commissioned, the finance team must capitalise the full installed cost — panels, inverters, mounting structures, AC and DC cables, transformers, civil works, commissioning charges, professional fees, and the freight and insurance attributable to the asset. Goods and Services Tax (GST) on the purchase forms part of the depreciable base only if Input Tax Credit (ITC) is not claimed under Section 16 of the CGST Act. For most rooftop commercial solar in 2026, ITC is restricted under Section 17(5)(c)/(d), so GST sits inside the depreciable base — increasing AD by ~13.8% of the pre-tax value.

The asset tag in the fixed asset register should read “Solar Power Generating System — [kW capacity]” and reference Block VIII at 40%. Capitalisation date equals the date of commissioning, evidenced by the DISCOM net-meter installation report or the chartered engineer’s commissioning certificate. This date is critical for the 180-day test — keep the email trail, the inspection report, and the first generation reading in the audit folder.

Step 3 — Year-1 40% Claim in ITR and Tax Audit

When the company files its income tax return (typically ITR-6 for corporates), Schedule DPM (Depreciation on Plant and Machinery) carries the WDV opening balance, additions during the year, depreciation rate, and closing WDV for each block. The solar plant entry appears under Block VIII at 40%. The tax auditor’s Form 3CD (clause 18) replicates this with a note on the date of capitalisation, days in use, and applicable rate. Where the plant qualifies for the half-year rule, the rate in Form 3CD reads 20% with a footnote citing the proviso to Section 32.

If you are also eligible for the additional depreciation of 20% under Section 32(1)(iia) — available for new plant acquired by an assessee engaged in manufacture or production — that 20% stacks on top of the 40% in Year 1, raising the first-year deduction to 60% of cost. Note: additional depreciation is not available for the power generation business itself, but is available where the solar plant is used by a manufacturer for captive consumption. This is a high-value but technical area; have your CA confirm fit against your specific business activity.

Step 4 — Residual WDV Claim Across Years 2 to 4

After Year 1, the closing WDV is 60% of the original cost. In Year 2, you apply 40% to this residual — that is 24% of the original cost. Year 3 brings 14.4% of original cost. Year 4 brings 8.64%. Cumulatively over four years you have written off 87.04% of the original asset value, with a tail running for many more years at diminishing amounts. The block-of-assets method means the WDV is pooled with any other 40% assets the business owns, simplifying calculation but requiring care if any asset in the block is sold (proceeds reduce the block WDV).

This long tail is the reason businesses sometimes elect to dispose of the plant at book value to a sister concern after Year 5 — it crystallises the residual depreciation. We do not recommend this without specific tax counsel; the general anti-avoidance rule (GAAR) and Section 50 can attach.

Step 5 — MAT and ICDS Reconciliation at Year-End

The Year-1 AD reduces taxable income under normal computation, but companies are also liable for Minimum Alternate Tax at 15% of book profits (under Section 115JB). Book profits are computed under Companies Act, 2013 depreciation rates (~6.33% straight-line over 25 years for solar) — so book profit stays much higher than tax profit in Year 1. The result: many profitable solar buyers end up paying MAT, not normal tax, in the AD year. The difference between MAT paid and the would-be normal tax is MAT credit, carried forward for 15 years under Section 115JAA and adjusted in later years when normal tax exceeds MAT.

ICDS (the Income Computation and Disclosure Standards) under Section 145(2) ensures alignment between accounting depreciation and tax depreciation disclosures. For solar, ICDS V (Tangible Fixed Assets) and ICDS IX (Borrowing Costs — if the plant was loan-funded and interest was capitalised) are the relevant standards. Tax-book reconciliation is documented in Schedule ICDS of ITR-6. The net cash benefit of AD survives MAT in most cases, because MAT credit is recovered later — but the timing is delayed, which is why an NPV-discounted calculation should drive the decision rather than headline tax saving.

Income Tax Act Provisions for Solar AD

The statutory framework is precise and worth understanding directly rather than through summaries. The four documents that govern solar AD in 2026 are listed below; every claim you make on ITR is defended by reference to these.

Section 32 of the Income Tax Act, 1961 — the parent provision. Subsection (1)(ii) grants depreciation on tangible assets owned by the assessee and used for business, at rates prescribed by the Rules. Subsection (1)(iia) grants additional depreciation of 20% for new plant acquired by a manufacturer (subject to conditions). The proviso to Section 32(1) imposes the half-year rule. Section 32(2) allows unabsorbed depreciation to be carried forward without time limit.

Rule 5 of the Income Tax Rules, 1962 — sets the rates. Sub-rule (1) refers to Appendix I for the rate table.

Appendix I to the Income Tax Rules, Part A, Block 8(ix)(l) — the actual rate. “Renewable energy saving devices, namely: …(l) Solar power-based systems” at 40% WDV. The same block includes “wind turbine generators”, “biogas plants”, and “ocean thermal energy plants” at 40%. Solar inverters, panels, and trackers all fall within this block.

CBDT Circular No. 1 of 2017 and Finance Act 2017 — the legislative reduction of the rate from 80% to 40% with effect from AY 2017–18. This is the live rate through and beyond 2026; there has been no further rate change for solar in subsequent Finance Acts.

Item	Tax law citation	What it tells you
Year-1 depreciation rate	IT Rules Appendix I, Block 8(ix)(l)	40% on WDV
Method	Section 32(1)(ii)	WDV method, block of assets
Half-year rule	Proviso to Section 32(1)	< 180 days in service → 50% of rate
Additional depreciation	Section 32(1)(iia)	+20% for manufacturers (Year 1 only)
Unabsorbed AD carry-forward	Section 32(2)	Indefinite
MAT applicability	Section 115JB	15% of book profit; AD does not reduce MAT base
MAT credit carry-forward	Section 115JAA	15 years
Tax audit disclosure	Section 44AB / Form 3CD clause 18	CA-certified asset register
ICDS reconciliation	Section 145(2) / ICDS V	Tax vs book depreciation reconciliation

Cross-check the Appendix I rate against the latest CBDT bare-act extract on incometaxindia.gov.in before filing, in case any subsequent Finance Act amends the schedule. As of the 2025–26 Finance Act, the 40% rate for solar power-based systems is unchanged.

For broader renewable energy financing context, the Indian Renewable Energy Development Agency (IREDA) and the Ministry of New and Renewable Energy (MNRE) publish concessional finance terms that often combine with AD to compress payback further — for IRR-positive industrial projects, IREDA term loans at 9.5–10.5% interest paired with AD push the equity IRR comfortably above 22%.

AD Calculation Example — 100 kW Commercial System

A 100 kW rooftop solar system on a manufacturing shed or commercial building, installed in 2026 at the prevailing CAPEX benchmark of ₹40 per watt (turnkey, EPC route, GST inclusive), gives a total project cost of ₹40,00,000. The buyer is a private limited company at the 25.17% effective tax rate (new manufacturing regime under Section 115BAA, including 10% surcharge and 4% cess). Plant is commissioned on 15 August 2026, well before October 1, so the full 40% Year-1 AD applies.

Year	Opening WDV (₹)	AD Rate	Depreciation (₹)	Tax Saving @ 25.17% (₹)	Closing WDV (₹)
1 (FY 2026–27)	40,00,000	40%	16,00,000	4,02,720	24,00,000
2 (FY 2027–28)	24,00,000	40%	9,60,000	2,41,632	14,40,000
3 (FY 2028–29)	14,40,000	40%	5,76,000	1,44,979	8,64,000
4 (FY 2029–30)	8,64,000	40%	3,45,600	86,987	5,18,400
4-year total	—	—	34,81,600	8,76,318	—

Over four years, the company saves ₹8.76 lakh in tax, which is 21.9% of the original project cost — effectively turning the ₹40 lakh outlay into a ₹31.24 lakh net cost. Combined with the operating electricity savings (a 100 kW plant in central India generates roughly 1.55 lakh kWh per year, displacing ₹13.2 lakh of grid power at ₹8.50/kWh), the cumulative cash benefit in Year 1 alone is ₹17.22 lakh against a Year-1 cash outflow of ₹40 lakh — payback inside 33 months.

If the same plant were commissioned on 5 November 2026 instead (after October 1), the half-year rule would halve the Year-1 AD to ₹8 lakh, cutting Year-1 tax saving to ₹2.01 lakh. The “missing” depreciation isn’t lost — it shifts into Years 2 through tail — but the time-value-of-money cost is meaningful. For a deeper look at commercial economics, our solar ROI calculation guide walks through the IRR mechanics.

Talk to our commercial team. We will model your specific AD impact against your tax slab and project timeline — no commitment. Request a free CAPEX feasibility report or call our solar engineer at +91 63904 05060.

AD Calculation Example — 1 MW Industrial System

A 1 MW (1,000 kW) ground-mounted or large rooftop industrial solar plant in 2026 costs roughly ₹35 per watt at scale (ground-mount, turnkey EPC), totalling ₹3.5 crore. The buyer is an industrial assessee at the 30% slab plus 12% surcharge and 4% cess — an effective rate of 34.94%. Plant commissioned on 1 July 2026, well before the half-year cut-off.

Year	Opening WDV (₹ lakh)	AD Rate	Depreciation (₹ lakh)	Tax Saving @ 34.94% (₹ lakh)	Closing WDV (₹ lakh)
1 (FY 2026–27)	350.00	40%	140.00	48.92	210.00
2 (FY 2027–28)	210.00	40%	84.00	29.35	126.00
3 (FY 2028–29)	126.00	40%	50.40	17.61	75.60
4 (FY 2029–30)	75.60	40%	30.24	10.57	45.36
4-year total	—	—	304.64	106.45	—

Over four years, the industrial buyer saves ₹1.06 crore in tax — 30.4% of the original project outlay. At a 30% headline rate (without surcharge and cess), the Year-1 saving alone is ₹42 lakh on a ₹1.4 crore deduction, which matches the headline figure usually quoted in industrial proposals.

For a 1 MW plant generating roughly 16 lakh kWh per year at ₹7/kWh displaced grid cost, annual energy savings of ₹1.12 crore stack on top of the tax saving. Year-1 total cash benefit: ₹1.61 crore against ₹3.5 crore outlay. Cumulative payback inside 28–30 months, with the residual 22 years of plant life delivering pure cash margin. This is why every industrial CFO with a stable tax position should be running the AD calculation as the first slide in any solar proposal — see our framework comparison in OPEX vs CAPEX 2026.

MAT (Minimum Alternate Tax) Implications

MAT exists to ensure that profitable companies cannot reduce their tax liability below 15% of book profit through deductions and exemptions. Section 115JB of the Income Tax Act, 1961 sets the rate at 15% of book profit (plus surcharge and cess), and Accelerated Depreciation is one of the deductions that triggers MAT for many solar-investing companies.

The mechanism works as follows. Under normal computation, your taxable income drops because of the 40% AD deduction. Under MAT computation, book profit is calculated from your Companies Act, 2013 financial statements where depreciation is charged at the much lower Schedule II rate (effectively ~6.33% straight-line over 25 years for solar plant). So your book profit stays much higher than your tax profit. The tax payable is the higher of the two computations: normal tax on tax profit, or MAT on book profit.

Computation	Year-1 Tax Profit	Book Profit	Tax Rate	Tax Payable
Normal (with AD)	₹1,00,00,000 − ₹40,00,000 = ₹60,00,000	—	30% (slab)	₹18,00,000
MAT	—	₹1,00,00,000 − ₹2,53,200 = ₹97,46,800	15% (115JB)	₹14,62,020
Tax actually paid	—	—	Higher of two	₹18,00,000

In this illustrative case, normal tax (₹18 lakh) is higher than MAT (₹14.62 lakh), so the company pays normal tax — and the AD benefit lands directly. But for very large AD claims relative to book profit, MAT can exceed normal tax, in which case the company pays MAT and earns MAT credit equal to the difference, carried forward for 15 years under Section 115JAA. The MAT credit is recovered in later years when normal tax exceeds MAT.

The new corporate tax regimes under Section 115BAA (22% base, no MAT) and Section 115BAB (15% base, no MAT for new manufacturers) eliminate MAT entirely — but they also disallow several deductions. Section 115BAA companies can still claim regular depreciation including the 40% solar AD rate, just not the additional 20% depreciation under Section 32(1)(iia). For most solar buyers, electing Section 115BAA is the cleaner route and removes the MAT complexity altogether.

For an industrial buyer on the older 30% regime considering whether to migrate to 115BAA in the same year as a large solar AD claim, the calculation should include the present value of MAT credits foregone versus the surcharge and cess relief. Our finance team runs this trade-off model for every CAPEX engagement above ₹2 crore — see our commercial solar service page for engagement options.

Documentation You Need to Claim AD

The 40% Year-1 deduction will be scrutinised at the Section 44AB tax audit and again at any subsequent income tax assessment. The documentation set below is what your CA will request and what we provide as part of every Heaven Green Energy commercial and industrial commissioning. Keep all of these in the audit file for at least eight years (the open-assessment window).

1. Tax invoice from the EPC contractor — line-itemised, with HSN codes, GST breakup, and a clear capitalisable cost split (modules, inverter, structure, BOS, civil, installation, commissioning).
2. Proof of payment — bank statement showing outflow against the invoice, or LC documents if the project was financed through a letter of credit.
3. Commissioning certificate from a Chartered Engineer — a CE certificate confirming the date of plant commissioning, capacity in kW, panel and inverter serial numbers, and confirmation that the plant is generating electricity. This is the document that pins down “put to use” date for the 180-day test.
4. DISCOM net-meter installation report — for grid-connected systems, the bi-directional meter installation report from the local discom corroborates the commissioning date and confirms the plant is grid-connected and operational.
5. Fixed asset register entry — internal accounting record showing the asset capitalised under “Plant and Machinery — Solar Power Generating System”, with capitalisation date, cost, and depreciation block reference (Block VIII at 40%).
6. Insurance policy — solar plant insurance covering all-risks, with the policy commencement date matching or preceding the commissioning date.
7. Form 3CD — Clause 18 — your CA’s tax audit report with the solar asset entered in the depreciation schedule at 40%, including notes on the half-year rule application if relevant.
8. Schedule DPM and Schedule ICDS in ITR-6 — the tax return entries that actually claim the deduction. The CA prepares these.
9. Subsidy adjustment note — if any government subsidy (state policy benefits, MNRE incentive) was received, a calculation showing how the subsidy was netted against the depreciable cost. Subsidies received reduce the asset’s depreciable base; failing to net them is the single most common error.
10. Captive consumption agreement — for industrial setups using the plant for own consumption, the open access or captive use agreement evidences business-purpose use. For an industrial solar deployment on an OA route, this also captures the wheeling-charge accounting.

The full document pack — invoice, CE certificate, commissioning report, asset register entry — is supplied by Heaven Green Energy as part of every EPC handover. Our solar EPC services include CA coordination on request, so your auditor receives everything in audit-ready format.

CFO-grade documentation, included. Every commercial and industrial commissioning by Heaven Green Energy ships with the full AD-compliant document pack — invoice, CE certificate, commissioning report, DISCOM net-meter report, and asset-register format. Request a turnkey CAPEX proposal.

Common Errors in Solar AD Claims (with the Tax-Office Response)

Across the commercial and industrial CAPEX projects we have supported, the AD-claim errors below recur with depressing frequency. Each one is a real disallowance trigger; each one is preventable with a 30-minute pre-filing review by a competent CA.

1. 1
   Claiming AD on the gross cost without netting subsidies. If you received a state subsidy or MNRE incentive, Explanation 10 to Section 43(1) requires you to net it against the actual cost before applying depreciation. Failure to net is a direct disallowance at scrutiny.
2. 2
   Claiming full 40% when the plant was commissioned after October 1. The proviso to Section 32(1) halves the rate to 20% in Year 1. We see this missed every year by finance teams whose CA has not been briefed on the actual commissioning date.
3. 3
   Claiming AD on an OPEX/PPA plant. AD is available only to the owner of the asset. Under an OPEX or PPA route, the developer owns the system; you only pay for power. Claiming AD here is a clear misstatement and will be reversed with interest under Section 234B.
4. 4
   Including GST in the depreciable base when ITC has been claimed. Section 16 of the CGST Act bars depreciation on the tax component of an asset where ITC is taken. If you claimed ITC, the GST does not capitalise — exclude it from the AD base or face dual benefit reversal.
5. 5
   Wrong capitalisation date. Treating the invoice date or payment date as the capitalisation date instead of the actual commissioning date. The "put to use" doctrine fixes the date at commissioning — not purchase order, not invoice, not payment.
6. 6
   Claiming additional 20% under Section 32(1)(iia) where the business is power generation. Additional depreciation is restricted for power generation businesses unless they have opted out of Section 32(1)(iia). For captive solar used by a manufacturer, additional depreciation can stack — but the contract and use evidence must support it.
7. 7
   Claiming AD where the company is a trust or charitable entity with no business income. Trusts running schools, hospitals, or temples under Sections 11/12 of the IT Act do not have taxable business income against which to set the deduction — the AD has no value to them. The OPEX route is usually a better fit for these buyers.
8. 8
   Missing ICDS reconciliation in the tax return. ICDS V (Tangible Fixed Assets) requires explicit reconciliation between book and tax depreciation in the return. Skipping the Schedule ICDS lines triggers a defective-return notice under Section 139(9) — minor administrative pain but pain nonetheless.

The institute publishing the most-cited guidance on these issues is the Institute of Chartered Accountants of India (ICAI), whose Guidance Note on Tax Audit (latest 2024 edition) covers the depreciation schedule disclosures in Form 3CD. Your CA should be working from that guidance note.

Claim AD vs Use OPEX/PPA — Pros, Cons, Verdict

The AD-versus-OPEX decision is the largest single financial choice in a commercial or industrial solar project. AD depends on the CAPEX route — you own the asset, you write off depreciation, you collect the tax shield. OPEX (or PPA) hands ownership to a developer who claims AD themselves and sells you power at a discount to the grid tariff. Both routes work, but they suit different buyers.

Verdict. For a profitable commercial or industrial buyer in the 25–34% tax slab with adequate cash or working capital headroom, the CAPEX route with AD claim is decisively superior — payback inside 3.5 years, 22+ years of free power thereafter, and the tax shield delivered in the first 12 months. For trusts, hospitals running on grants, or businesses in a multi-year loss position, the OPEX route is more appropriate. The decision rule is the buyer’s marginal tax rate × project IRR: anything above 6% on this product favours CAPEX. Full comparison in our OPEX vs CAPEX solar guide.

How Heaven Green Energy Helps Structure AD Claims

Heaven Green Energy operates as a turnkey EPC provider for commercial and industrial CAPEX solar across India, with deep experience supporting the AD claim process from the buyer’s side. Where we add value to the tax claim, specifically:

• AD-compliant invoicing. Our invoices are line-itemised with HSN codes, GST breakup, and capitalisable cost split — directly usable by your CA in the fixed asset register and Form 3CD without rework.
• Capitalisation date documentation. We supply a dated chartered engineer’s commissioning certificate, the DISCOM net-meter installation report, and the first generation data — the three documents that establish the 180-day test under the proviso to Section 32.
• CE certificate as standard. Every commercial commissioning ships with a chartered engineer certificate confirming capacity, panel and inverter serials, and date — the document most often missing from competitor handovers.
• Audit support. If your tax audit raises queries on the depreciation schedule, our project team responds directly to your CA with the supporting documents and statutory references.
• CFO-grade financial modelling. Before contract signature, our commercial team builds a project-specific AD + ROI + IRR model that lays out Year-1 to Year-25 cash flows including MAT impact for your tax slab.
• Concessional finance coordination. Where the project is loan-funded through IREDA or a public-sector bank, we coordinate the documentation and stage-wise drawdown to align capitalisation with the financial year-end.
• Subsidy netting calculations. For projects that combine state policy benefits with the AD claim, our finance team prepares the Explanation 10 netting calculation showing exactly how the subsidy reduces the depreciable base. This calculation is the single document most often missing when a tax officer raises a query on the depreciation schedule, and we pre-empt it.
• Multi-year schedule modelling. We build the full Year-1 through Year-25 depreciation schedule for your project, with WDV roll-forward, MAT credit accrual and recovery, and ICDS reconciliation lines. The model hands directly to your CA in spreadsheet form.

Our commercial and industrial portfolio spans pharmaceutical plants, cold-chain warehouses, textile units, and engineering MSMEs across northern and western India — each project with a documented AD claim trail that has survived multiple Section 143(3) scrutiny notices. The reason we keep winning these defences is that the documentation is built into the EPC handover, not bolted on after the fact.

Explore the services aligned to your business profile:

• Commercial Solar — 10–500 kW rooftop systems with full AD support and CAPEX modelling.
• Industrial Solar — 500 kW–10 MW ground-mount and rooftop with open access integration.
• Solar EPC Services — turnkey delivery, performance guarantee, and audit-ready documentation.
• Contact our commercial team — free CAPEX feasibility and AD impact model within 48 hours.

Frequently Asked Questions

What is the exact Accelerated Depreciation rate for solar in India in 2026?

The Accelerated Depreciation rate for solar power-based systems in India in 2026 is 40% on the Written Down Value (WDV) method, as listed in Appendix I of the Income Tax Rules, 1962, Part A, Block 8(ix)(l). This rate was last amended by the Finance Act 2017 (reducing from 80% to 40% with effect from Assessment Year 2017–18) and remains the operative rate through 2026. The 40% applies in Year 1, with the residual 60% depreciated at 40% of the reducing balance in Years 2 to 4 and tail.

Can a partnership firm or LLP claim Accelerated Depreciation on solar?

Yes — Section 32 of the Income Tax Act applies to all assessees carrying on business or profession, including partnership firms, LLPs, proprietorships, and companies. The 40% Year-1 AD rate is identical across these entity types. The only differences are at the entity-tax-rate level (LLP at 30% plus surcharge and cess, partnership firm at 30% plus surcharge and cess) and at partner-level deduction flow-through. The plant must be owned by the firm and used for business in the firm’s name.

Does the half-year rule apply to solar plant commissioned after October 1?

Yes. The proviso to Section 32(1) of the Income Tax Act halves the depreciation rate for assets put to use for less than 180 days in the year of acquisition. A solar plant commissioned after October 1 of the financial year is in service for less than 180 days, so the Year-1 rate falls from 40% to 20%. The remaining depreciation is not lost — it shifts into Year 2 and onwards — but the time-value cost is real. Plan commissioning before October 1 to capture full Year-1 AD.

How does Accelerated Depreciation interact with Minimum Alternate Tax (MAT)?

AD reduces taxable income under the normal computation but does not reduce book profit, which drives Minimum Alternate Tax under Section 115JB at 15%. So for large AD claims, MAT can exceed normal tax — in which case the company pays MAT and earns MAT credit equal to the difference, carried forward for 15 years under Section 115JAA. Companies that have opted for the new Section 115BAA regime (22% base, no MAT) bypass this complexity entirely while still being able to claim the 40% solar AD.

Can I claim Accelerated Depreciation on the GST portion of the solar plant cost?

Yes, but only if you have not claimed Input Tax Credit (ITC) on that GST under the CGST Act. For most rooftop commercial solar, ITC is restricted under Section 17(5) of the CGST Act, so the GST sits inside the depreciable base — and AD applies to the GST-inclusive cost. If your business is eligible to claim ITC on the solar plant (rare for non-power-generation businesses), exclude the GST from the depreciable base. Claiming both ITC and AD on the same GST amount is dual benefit and will be reversed at audit.

What documentation will my Chartered Accountant ask for to claim AD?

The minimum set is: (1) the EPC tax invoice with HSN codes and capitalisable cost split, (2) proof of payment, (3) a Chartered Engineer’s commissioning certificate dated before March 31 of the financial year, (4) the DISCOM net-meter installation report, (5) the fixed asset register entry under “Plant and Machinery — Solar Power Generating System” at Block 8 (40% rate), and (6) insurance policy covering the plant. Heaven Green Energy supplies items (1), (3), and (4) as part of every commercial commissioning handover.

Can a trust or charitable organisation claim Accelerated Depreciation on solar?

Trusts and charitable organisations registered under Sections 11 and 12 of the Income Tax Act do not have taxable business income against which to set the AD deduction, so the depreciation shield has no tax value to them. These entities are typically better served by an OPEX/PPA route, where the developer captures the AD shield and passes a portion of the saving back to the trust as a lower tariff. For trusts running incidental business activities with taxable income, AD can apply to that portion — speak to your tax advisor.

How long does unabsorbed Accelerated Depreciation carry forward?

Under Section 32(2) of the Income Tax Act, unabsorbed depreciation (including AD that exceeds Year-1 taxable income) carries forward indefinitely until fully set off against future business or other income. This is unlike business loss under Section 72, which carries forward only eight assessment years. The indefinite carry-forward makes solar AD a long-life tax asset on the books — particularly useful for cyclical businesses with intermittent profitable years.

Does Heaven Green Energy provide the chartered engineer certificate needed for AD?

Yes — every commercial and industrial commissioning by Heaven Green Energy includes a Chartered Engineer certificate as standard. The certificate confirms the plant capacity in kW, the panel and inverter serial numbers, the commissioning date, and that the plant is generating electricity. This document is the primary evidence for the “put to use” test under Section 32 and for the 180-day half-year rule application. Visit our contact page to request a sample CE certificate format.