Accelerated Depreciation on Solar Panels in 2026: A Complete Guide for Businesses
Understand how businesses can potentially benefit from solar depreciation, commercial rooftop solar and lower electricity costs with guidance from Aarambh Energy, a trusted solar panel company in Lucknow.
Why Businesses Should Consider Commercial Solar
For factories, hotels, hospitals, warehouses, offices and commercial buildings, installing a rooftop solar system can provide two major financial advantages: lower electricity expenses and potential tax benefits through applicable depreciation provisions.
Electricity bills are a major operating expense for many businesses. A properly designed commercial solar system can help reduce dependence on grid electricity while generating clean power for the business.
At the same time, eligible businesses that own and use a solar plant for business purposes may be able to claim depreciation under the applicable provisions of the Income-tax law.
What Is Accelerated Depreciation on Solar Panels?
Accelerated depreciation is a tax benefit that can allow an eligible business to claim a comparatively higher depreciation deduction on certain solar power generating systems during the earlier years of asset ownership.
Instead of calculating depreciation only on the original purchase price every year, depreciation under the Written Down Value (WDV) method is calculated on the reducing value of the asset or relevant block of assets.
For eligible solar power generating systems, the applicable rate referred to in the source material is 40% on Written Down Value, subject to the applicable Income-tax Rules.
How Does 40% Solar Depreciation Work?
Consider a solar plant with a capitalized value of ₹50 lakh. For illustration, if the applicable depreciation rate is 40% under the WDV method:
| Year | Opening Value | Depreciation @ 40% | Closing Value |
|---|---|---|---|
| Year 1 | ₹50,00,000 | ₹20,00,000 | ₹30,00,000 |
| Year 2 | ₹30,00,000 | ₹12,00,000 | ₹18,00,000 |
| Year 3 | ₹18,00,000 | ₹7,20,000 | ₹10,80,000 |
The illustration shows why depreciation under the WDV method creates a larger deduction during the initial years and a progressively smaller deduction as the written down value decreases.
Section 32 and Solar Depreciation
Section 32 of the Income-tax Act deals with depreciation on assets used for business or professional purposes. For a business-owned solar power system, the relevant conditions need to be checked before claiming depreciation.
1. Ownership of the Solar Plant
The business generally needs to have the required ownership interest in the solar asset to claim depreciation. This is especially important when comparing CAPEX with OPEX or RESCO solar models.
2. Business Use
The solar plant should be used for business or professional purposes. Examples include solar systems installed for factories, warehouses, hotels, hospitals, offices and other commercial premises.
3. Put to Use / Commissioning
The solar plant must be installed and put to use in accordance with the applicable tax provisions. The commissioning date can affect the amount of depreciation available in the first year.
4. Capitalisation
The solar project should be appropriately capitalised and recorded as a fixed asset in the business books, subject to applicable accounting and tax requirements.
Additional 20% Depreciation: Is 60% Always Available?
No. Businesses should not automatically assume that every solar installation qualifies for a total depreciation rate of 60%.
The additional depreciation provision under Section 32(1)(iia) has specific eligibility conditions. The business, asset and use of the asset must satisfy the applicable requirements.
For example, a manufacturing business installing a solar plant for its operations may have a stronger basis to examine the additional depreciation provision. However, a service business, office or commercial property should not automatically include the additional 20% in its financial projections.
Who Can Potentially Benefit From Solar Depreciation?
🏭 Manufacturing Units
Factories and manufacturing businesses can evaluate rooftop solar for reducing electricity costs and applicable tax benefits.
🏢 Commercial Buildings
Corporate offices and commercial buildings can consider rooftop solar to reduce recurring electricity expenditure.
🏨 Hotels & Hospitals
Large facilities with significant electricity consumption can evaluate commercial solar to improve long-term energy economics.
📦 Warehouses
Warehouses and logistics facilities with suitable rooftop space can consider solar for reducing operational electricity costs.
🏪 Businesses & MSMEs
Eligible businesses can evaluate solar based on electricity usage, roof area, ownership structure and financial requirements.
⚡ Industrial Units
Industrial consumers can explore captive rooftop solar solutions designed around their electricity consumption profile.
Who Generally Cannot Claim Business Depreciation?
- A salaried individual installing residential solar does not generally have a business depreciation claim merely because a solar system is installed at home.
- A business customer using an OPEX or RESCO solar model generally does not claim depreciation on a plant owned by the solar developer.
- The tax treatment can differ where ownership, lease structure or business-use conditions are different.
The 180-Day Rule and Solar Commissioning
The number of days for which an asset is put to use during the financial year can affect the first-year depreciation claim.
Where the applicable rule restricts depreciation because an asset is put to use for less than the prescribed period, the first-year claim can be limited to a specified portion of the normal depreciation.
CAPEX vs OPEX Solar: Who Gets the Depreciation Benefit?
| Solar Model | Plant Ownership | Depreciation Claim |
|---|---|---|
| CAPEX | Business generally owns the plant | Business can evaluate depreciation eligibility |
| OPEX / RESCO | Developer owns the plant | Developer generally claims depreciation |
Ownership is one of the most important factors when calculating the financial benefit of a commercial solar project.
How to Calculate the Potential Tax Saving From Solar?
Once the depreciable cost and applicable depreciation rate are determined, the potential tax saving can be estimated using the business's applicable tax rate.
For example, if an eligible project has a depreciable cost of ₹45 lakh and the applicable depreciation rate is 40%, the illustrative depreciation deduction would be ₹18 lakh.
| Parameter | Illustrative Example |
|---|---|
| Solar Project Cost | ₹45 lakh |
| Illustrative Depreciation Rate | 40% |
| Year 1 Depreciation | ₹18 lakh |
| Illustrative Tax Rate | 25% |
| Illustrative Tax Saving | ₹4.5 lakh |
This is only an illustration. Actual tax savings depend on the business's applicable tax regime, taxable income, depreciation eligibility, GST treatment, asset cost, commissioning date and other applicable provisions.
GST and Solar Depreciation
GST treatment can also affect the depreciable cost of a solar project. Where a GST-registered business is eligible to claim input tax credit, the GST component treated as credit may generally not form part of the depreciable asset cost.
The actual GST treatment depends on the project structure, invoices, nature of supply, EPC contract and applicable GST provisions. Businesses should verify the treatment with their tax professional.
Documents Businesses Should Maintain
- Solar system tax invoice
- Proof of payment
- Commissioning documentation
- Fixed asset register entry
- Capitalisation records
- Net-metering or DISCOM documents, where applicable
- Relevant project and installation documents
Common Mistakes Businesses Should Avoid
- Assuming that every solar project automatically qualifies for 60% depreciation.
- Ignoring the commissioning and 180-day considerations.
- Claiming depreciation on a solar plant that the business does not own.
- Ignoring the effect of GST input tax credit on asset cost.
- Using residential solar subsidy information for commercial projects.
- Calculating tax savings without considering the company's actual tax regime.
Solar Depreciation vs Solar Subsidy
| Feature | Business Solar Depreciation | Residential Solar Subsidy |
|---|---|---|
| Nature | Tax depreciation benefit | Government subsidy scheme |
| Typical Beneficiary | Eligible business asset owner | Eligible residential consumer |
| Purpose | Reduce taxable income through depreciation | Reduce eligible residential solar installation cost |
| Basis | Applicable Income-tax provisions | Applicable government scheme guidelines |
Benefits of Commercial Solar for Businesses
💡 Lower Electricity Bills
Generate electricity from your own rooftop solar system and potentially reduce dependence on grid power.
📊 Better Project Economics
Solar savings combined with applicable tax benefits can improve the overall financial case for an eligible business.
🌱 Cleaner Energy
Solar power can help businesses move towards cleaner and more sustainable electricity generation.
Looking for the Best Solar Panel Company in Lucknow?
Aarambh Energy provides solar consultation and solutions for residential, commercial and industrial customers in Lucknow and nearby areas.
From rooftop solar planning and system selection to installation, monitoring and maintenance, our team can help businesses evaluate a solar solution according to their electricity consumption, available roof space and project requirements.
Frequently Asked Questions
Can a business claim depreciation on a solar plant?
An eligible business that owns and uses a solar plant for business purposes may be able to claim depreciation subject to the applicable Income-tax provisions and conditions.
Is solar depreciation always 40%?
The applicable rate depends on the relevant asset classification and tax rules. The source material for this guide refers to a 40% WDV rate for eligible solar power generating systems. Businesses should verify the rate applicable to their specific project.
Can every company claim an additional 20% depreciation?
No. Additional depreciation has specific eligibility conditions. Businesses should not assume that the total benefit is automatically 60%.
Does OPEX solar give depreciation to the customer?
Generally, depreciation follows ownership of the solar plant. Under a typical OPEX or RESCO structure where the developer owns the plant, the developer generally claims the depreciation.
Does solar reduce business electricity costs?
A properly designed solar system can generate electricity for the business and potentially reduce the amount of electricity purchased from the grid.
Can Aarambh Energy help businesses plan commercial solar?
Yes. Aarambh Energy can help businesses evaluate their solar requirements, system capacity, rooftop suitability and installation requirements.
Make Your Business More Energy Efficient
Explore commercial rooftop solar with Aarambh Energy and understand how solar generation, electricity savings and applicable tax benefits can contribute to your business's long-term energy strategy.
Disclaimer: This article is intended for general informational purposes only and should not be treated as tax, legal or financial advice. Tax depreciation, additional depreciation, GST input tax credit, ownership treatment, commissioning rules and other provisions may vary depending on the business, project structure and applicable law. Businesses should consult their Chartered Accountant or qualified tax professional before relying on any tax calculation or filing.
Aarambh Energy – Solar Solutions in Lucknow
Aarambh Energy is focused on helping homes, businesses and commercial establishments explore reliable solar energy solutions. If you are searching for the best solar panel company in Lucknow, our team can assist with solar consultation, system planning, installation, monitoring and maintenance.
Whether you need a rooftop solar system for your home, commercial solar for your business or an industrial solar solution, Aarambh Energy can help you understand your available options and plan your solar project according to your requirements.