Accelerated Depreciation on Solar in 2026: What a Factory Can Actually Claim

In 2026 a factory's solar plant earns depreciation at 40% of written-down value, not the older 80%. If the factory is a manufacturer and the plant is new, section 33(8) of the Income-tax Act, 2025 adds 20% of cost in the first year, or 10% plus 10% if the plant is used for under 180 days. Ownership and tax regime decide eligibility.

Which law applies to a solar plant in 2026?

The Income-tax Act, 2025 came into force on 1 April 2026, and the Income-tax Rules, 2026 were notified on 20 March 2026 to operate it. For tax years starting on or after that date, depreciation sits in section 33 of the new Act and the rates are in Appendix I of the new Rules. Earlier years, including the financial year ended 31 March 2026, are still dealt with under the 1961 Act, where the same rules sit in section 32. The Income Tax Department publishes both, so make sure you read the right one for the year in which the plant is put to use.

What rate does a solar plant get?

Appendix I, Part A, block III (machinery and plant), item 7(xiii) lists renewable energy devices, and sub-item (i) is solar power generating systems. The rate is 40% of the written-down value of the block. Solar water heaters, solar pumps and solar photovoltaic modules and panels sit in the same group. The department's longer rate table shows how the picture changed over the years for this group:

The shorthand "accelerated depreciation" therefore comes from the 80% era. Today the first-year advantage for a manufacturer comes from the additional depreciation described below, not from a higher base rate.

How do the 180-day rule and additional depreciation work together?

Two provisions shape the first-year figure. Section 33(4) restricts the deduction to 50% of the prescribed rate if the asset is acquired during the tax year and used for less than 180 days in that year. Section 33(8) and (9) give additional depreciation of 20% of actual cost in the year the new plant is acquired and put to use, or 10% in that year and 10% in the next if it is used for under 180 days. The table sets out the cases for a taxpayer with enough profit to absorb the deduction.

Timing matters. For a tax year ending 31 March 2027, counting inclusively, a plant put to use on or before 3 October 2026 gives 180 days; one commissioned after that date does not. Confirm with your accountant how the days are counted and which date, commissioning or net-meter connection, evidences first use. Also ask how the block's written-down value rolls forward after the additional deduction, because the statute defines that value by reference to another section we have not reproduced here.

What can block the claim?

• Not a manufacturer. Additional depreciation needs the business to be manufacture or production of any article or thing, or generation, transmission or distribution of power.
• Not new. The plant must not have been used within or outside India by anyone else before your installation.
• Installed in an office or residence. The statute excludes new plant installed in office premises or residential accommodation, including a guest house. Solar on an office building's roof is therefore a question for your adviser; solar on a factory shed is the usual case.
• Not wholly for business. Where an asset is used partly for business, the deduction is restricted to the fair proportionate part.
• Not enough profit. Where profits are lower than the deduction, it is allowed to the extent of available profits and the rest carries forward to the following years.
• Your tax regime. The department's note says that under the concessional regimes depreciation is restricted to a maximum of 40% on any block, and we have not confirmed from the new Act how additional depreciation is treated for each regime. Ask.

How does depreciation change the payback and IRR?

Depreciation does not create cash. It reduces taxable profit, and the saving is the deduction multiplied by your tax rate. Because the rules front-load the deduction, the benefit arrives early. For every 100 of plant cost, a manufacturer using the plant for 180 days or more has a first-year deduction of 60, and the tax saving is 60 times its tax rate. With the 180-day rule biting, it is 30 in year one and the extra 10 next year. Two other effects run the opposite way: the electricity bill you save becomes higher taxable profit, and operation and maintenance cost is deductible.

The clean way to model it is a year-by-year cash flow: capital cost, loan interest and principal if financed, saved electricity cost, operating cost, then the tax effect of depreciation and of the changed profit, using your actual rate. Our solar EMI calculator covers the loan side, and the solar finance page explains the funding routes. Add the tax shield your accountant computes rather than assuming a headline percentage, and compare the owned and third-party options on the same cash-flow basis.

How Secured Engineers helps

We are an engineering contractor, not tax advisers, so the claim itself belongs with your chartered accountant. What we can supply are the documents that support it: an invoice split between equipment and installation, a commissioning certificate and the DISCOM net-meter connection date, the equipment list showing the plant is new, and the site location, so the first-use date is evidenced. Design is done in-house, Fire NOC, CEIG and DISCOM net-metering filings are prepared in-house, and we work from offices in Noida (Delhi NCR) and Ludhiana, across 535+ projects in 18+ states, with 89.77% repeat clients. We can also give you a realistic commissioning date from the build and approval schedule, so the 180-day question is answered before you order.

For a solar enquiry, start from the solar finance page and send us your roof, load and expected commissioning month; we will tell you which side of the 180-day line it falls on. Reach us on WhatsApp, call +91 70099 85817, or request a free proposal. You can also open the solar EPC service page for scope and the published cost band.