How Commercial and Industrial solar users can get tax benefits from Accelerated Depreciation?
by Bhavin Gajjar
Posted on April 03, 2019 at 10:21 PM
The use of solar panels is promoted by the department of The Ministry of New and Renewable Energy through different programmes. i.e. Rooftop Solar Programme for residential, commercial and industrial buildings. With a goal of reaching 175GW of green energy capacity by 2022, the Government of India has indeed shown a keen interest and ambition towards promoting the use of green energy.
There are tax incentives offered by the government of India, for the commercial and industrial solar users. To promote the use of solar power in the commercial and industrial sectors, the government of India offers accelerated depreciation of fixed assets equated with the solar power plant.
What actually the Accelerated Depreciation is?
It can be defined as a fast rate of depreciation of the fixed assets in the earlier years of assets. It actually allows greater deductions in the early years. Whereas in the traditional method of depreciation called straight-line depreciation, the depreciation will be the same during the early years of assets.
In Accelerated Depreciation, earnings and assets will be decreased in the early years due to higher depreciation expense. However, there will be a minimal impact on earnings and assets in the later years due to lower depreciation.
Under section 32 of the Income Tax Act, the accelerated depreciation benefits the commercial and industrial solar user to get tax relief. The current rate of acceleration is 40% that can be claimed in one year. It implies that the commercial and industrial solar rooftop users can get a benefit from the government’s tax rebates on accelerated depreciation of 40%.
Besides these tax incentives offered by the government, there are many other advantages of using solar rooftops as well. These additional advantages are not only for the commercial or industrial users only, but also the residential users. Check out our previous blog to go through the advantages of a solar rooftop system.
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