How to Claim Accelerated Depreciation on Solar India

Knowing that 40% Accelerated Depreciation (AD) exists on solar is one thing. Actually claiming it correctly — without a tax notice or audit objection — is another. Across our 10,000+ solar installations, Heaven Green Energy’s project team has seen dozens of businesses lose this benefit entirely because of timing errors, incorrect capitalisation, or missing documentation. This guide gives you the exact process to claim AD on your solar plant, from commissioning to ITR filing, in a way that survives a tax scrutiny.

Key takeaway. To claim 40% Accelerated Depreciation on solar, your plant must be commissioned before March 31 of the relevant financial year and capitalised under “Plant and Machinery — Renewable Energy” at the full installed cost. In Year 1 you deduct 40% of the asset value from taxable income. At a 25% tax rate, a ₹1 crore plant generates ₹10 lakh in Year 1 tax saving. Heaven Green Energy provides the commissioning certificate and DISCOM documents needed for your CA’s Form 3CD audit.

This guide follows the exact process from asset purchase to ITR-6 filing, covering every step your finance team needs to take.

Understanding What You Are Actually Claiming

Accelerated Depreciation on solar is a deduction under Section 32(1)(iia) of the Income Tax Act, 1961, read with Rule 5 of the Income Tax Rules, 1962, and the Schedule in Appendix I, Part A, Serial No. 8 — “Renewable energy saving devices: Solar power-based systems” at a rate of 40% per annum on the Written Down Value (WDV) method.

This is not a direct tax refund. It is a deduction from taxable income. If your company has ₹1 crore taxable profit and your solar plant gives ₹20 lakh depreciation, your taxable profit drops to ₹80 lakh. At 25% tax rate, you pay tax on ₹80 lakh instead of ₹1 crore — saving ₹5 lakh in Year 1 taxes.

For a deeper understanding of the AD rates and quantum, read our accelerated depreciation on solar explained guide. This guide assumes you have already decided to claim and now need the step-by-step process.

The AD Claim Readiness Checklist

Before starting the ITR filing process, ensure all of the following are in place:

Step-by-Step: From Commissioning to AD Claim

Step 1 — Commission the Plant Before March 31

This is the most time-sensitive step and the most commonly missed. The Income Tax Act requires that the asset be “put to use” in the financial year you want to claim the depreciation. For solar, “put to use” means:

• The solar panels are physically installed and generating electricity
• The net metering connection to the DISCOM is live (or at minimum the installation is complete and the DISCOM meter is pending)
• The system has been commissioned and the commissioning certificate has been issued by the EPC company

If your system is installed but the DISCOM net metering meter is delayed (a common problem in India), courts and CBDT circulars have generally held that installation completion — even without the DISCOM connection — constitutes “put to use” for an on-grid solar plant that is generating power via a temporary arrangement. However, this is a grey area — the safest approach is to have both installation and DISCOM meter in place before March 31.

Heaven Green Energy plans all Q3/Q4 installations with AD deadlines in mind. If you tell us you need AD for the current financial year, we prioritise your commissioning timeline accordingly. For official rules, see Section 32 of the Income Tax Act and the CBDT depreciation schedule.

Step 2 — Capitalise the Asset Correctly in Your Books

On the date of commissioning, your accountant must create a fixed asset entry. The correct capitalisation is:

Asset class: Plant and Machinery — Renewable Energy (or “Solar Power Plant” as a sub-class under Plant and Machinery)

Asset value: Full installed cost including GST. If you paid 12% GST and recovered it via ITC, the asset value for depreciation purposes is the pre-GST cost. If you did not recover ITC (rare for commercial buyers but applicable if your supply is exempt), the asset value includes GST.

Supporting documents to attach to the asset register entry:

• EPC contractor’s final GST invoice with HSN code breakdown
• Commissioning certificate
• DISCOM letter (or application acknowledgment for net metering)

Step 3 — Calculate the Depreciation Schedule

Using the WDV method at 40% per annum, prepare the depreciation schedule in your fixed asset register:

If the plant is commissioned after October 1 (within 180 days of year-end), the Year 1 rate is 20% instead of 40%. Adjust accordingly.

Step 4 — Reflect Depreciation in Financial Statements

Your chartered accountant must include the solar plant depreciation in:

• Schedule of Fixed Assets in the Balance Sheet notes
• Statement of Profit and Loss — depreciation as an expense line
• The depreciation must match the tax depreciation schedule (IT Act Schedule) — the Companies Act schedule and IT Act schedule often differ; maintain both and reconcile

Step 5 — Tax Audit (Form 3CD)

If your annual turnover exceeds ₹1 crore (or ₹50 lakh for professionals), a tax audit under Section 44AB is mandatory. Your CA will prepare Form 3CD, which includes:

• Clause 18 — details of depreciation claimed
• The solar plant must appear in Clause 18 as “Plant and Machinery — Renewable Energy” at 40% rate
• The CA must verify that the asset was “put to use” before March 31 and that the 180-day condition is met (or note that the half-rate applies)

Keep the commissioning certificate and DISCOM acknowledgment available for your CA — these are the two documents most likely to be requested during the Clause 18 verification.

Step 6 — File ITR with Correct Depreciation

For companies: file ITR-6. For LLPs and partnerships: ITR-5. For proprietors: ITR-3 (business income schedule).

In the ITR form, the depreciation appears in:

• Schedule DPM (Depreciation on Plant and Machinery) — list the solar plant, its opening WDV, depreciation rate (40%), and depreciation amount
• Schedule BP (Business Profit computation) — the depreciation reduces taxable business income

Common ITR filing errors to avoid:

• Entering the IT Act depreciation rate (40%) where the Companies Act rate (15%) belongs — these are two separate depreciation schedules
• Forgetting to carry forward unabsorbed depreciation if the business has insufficient profit
• Entering the asset at post-GST value when ITC was actually claimed

Ready to install? Talk to our solar engineer — we plan your commissioning timeline around your AD deadline and provide all CA documents within 48 hours of commissioning. Call +91 63904 05060 or request a callback.

The 4-Document AD Claim Package

Heaven Green Energy provides four critical documents that your CA needs to process the Form 3CD solar plant entry:

1. Commissioning Certificate — signed by Heaven Green Energy’s site engineer; includes commissioning date, system capacity (kW), panel/inverter models, and installation address. This is the primary “put to use” proof.
2. Final GST Tax Invoice — with full HSN code breakup for each component, GSTIN of both parties, and the total asset value.
3. DISCOM Net Metering Certificate — confirming that the bidirectional meter is installed and the connection is live. In Gujarat, this is issued by UGVCL/DGVCL/MGVCL/PGVCL.
4. Generation Log (First Month) — SCADA or inverter portal printout showing electricity generation in the commissioning month. This corroborates the “put to use” claim.

If any of these documents are missing or incorrectly dated, the AD claim is at risk during tax scrutiny. The MNRE commissioning certificate format is recognised by all IT assessing officers. Call us immediately after commissioning if any document is incomplete — we resolve these within 24 hours.

Common Mistakes That Kill AD Claims

1. 1
   Commissioning after March 31 — the most expensive mistake. Delays in DISCOM meter installation push the commissioning date into the next financial year. Build a two-month buffer into your installation schedule.
2. 2
   Capitalising at the wrong value — if you paid GST and claimed ITC, the depreciable value is the pre-GST cost. If you don't correct this, your depreciation is overstated and may be disallowed on audit.
3. 3
   Using OPEX/PPA model but claiming AD — you cannot claim AD on an asset you don't own. If your system is under a PPA, the developer claims the AD, not you. Confirm ownership structure before planning tax benefits. See our [OPEX vs. CAPEX guide](/blog/opex-vs-capex-solar).
4. 4
   Splitting the solar plant into separate asset categories — some accountants capitalise panels, inverters, and structures separately. This can result in incorrect depreciation rates for sub-components. Capitalise as one integrated asset.
5. 5
   Not maintaining generation records — your CA needs evidence of actual use. Monthly generation logs from the inverter portal or SCADA system satisfy this requirement. Set up automatic export from day one.

Pros and Cons of Claiming Accelerated Depreciation

How Heaven Green Energy Helps You Claim AD Successfully

At Heaven Green Energy, we treat AD documentation as a core project deliverable — not an afterthought. Every commercial solar project we complete includes:

• Commissioning certificate with exact date and system details
• GST invoice with correct HSN codes for clean capitalisation
• DISCOM net metering certificate (or escalation support if delayed)
• Monthly generation log setup on the inverter monitoring portal

We also coordinate with your CA or refer you to solar-specialised CA firms in Ahmedabad, Surat, and Rajkot who handle Form 3CD for solar assets regularly.

• Industrial Solar EPC — 100 kW+ projects with AD-optimised commissioning timelines.
• Commercial Solar — complete tax documentation package included.
• Solar financing overview — understand all financial benefits together.
• Contact our finance team — we’ll coordinate your commissioning date with your AD deadline.

According to IREDA’s commercial solar data, businesses that correctly claim AD see a net payback period of 3–3.5 years compared to 4–5 years without AD. Don’t miss this.

Frequently Asked Questions

Can I claim AD on solar if my company is in the new tax regime?

The new domestic corporate tax regime (introduced under Section 115BAA) does not allow most deductions and incentives — but depreciation under Section 32 is explicitly allowed even under the new regime. So yes, you can claim the 40% AD on solar even if your company has opted for the Section 115BAA lower tax rate. Confirm this with your CA as individual circumstances may vary.

What if the commissioning certificate date is wrong?

If your EPC company issues a commissioning certificate with a date that doesn’t match the actual generation start date (as evidenced by inverter logs), there can be a discrepancy that a tax officer may flag. Always ensure the commissioning certificate date, the DISCOM meter installation date, and the first generation record are consistent. Heaven Green Energy issues certificates with exact commissioning timestamps.

Do I need separate depreciation for the battery if it is part of my solar system?

If the battery is installed as part of the solar system and capitalised together as a single solar power plant asset, the entire cost (including battery) attracts 40% AD. If the battery is capitalised separately under a different asset class, it may get a different rate. The cleaner approach is to capitalise the entire system as one renewable energy plant.

What is the 180-day rule exactly?

If a new asset is used for more than 180 days in the financial year of purchase (i.e., commissioned before October 2 of the relevant FY), full-year depreciation applies — 40% in the first year. If used for 180 days or fewer (commissioned on October 2 or later), only half the annual rate applies — 20% in the first year. Plan your commissioning accordingly for full benefit.

Can a partnership firm or LLP claim AD on solar?

Yes. Partnership firms and LLPs that file business income can claim AD under Section 32. The solar plant appears as an asset on the firm’s books, and each partner’s share of the depreciation benefit flows through the firm’s profit and loss. LLPs file ITR-5 and include the Schedule DPM entries for the solar plant.

What happens to AD when I sell the solar plant?

When you sell a depreciable asset, the tax treatment depends on whether the sale price exceeds or falls short of the book WDV. If sale price > WDV, the excess is a short-term capital gain (or business income). If sale price < WDV, the shortfall (terminal depreciation) is an allowable business expense. Solar plants are rarely sold standalone — this scenario is most relevant in M&A transactions involving the entire business.

Is the 40% AD rate guaranteed for the full 25-year system life?

The 40% rate is prescribed by law and applies to “renewable energy saving devices” as currently defined. However, tax laws can change. The rate was 80% before 2017 and was reduced. There is always a risk of future revision, but businesses can rely on the current 40% rate for their current-year capital investment planning. The already-claimed AD for past years cannot be reversed by future rate changes.