Search
Close this search box.

Accelerated Depreciation On Solar

Introduction:

As the world shifts towards sustainable energy solutions, investing in solar power has become a popular choice for businesses looking to reduce their carbon footprint and save on energy costs. In India, the Government has incentivized the adoption of solar energy through various policies. The ‘Pradhanmantri Suryoday Yojana’ recently introduced by PM Shri Narendra Modi highlights the importance of energy independence and cost savings especially for the middle and lower income groups. There are also various tax benefits that allow businesses to recover the cost of their solar investments more quickly. One of them is through ‘Accelerated Depreciation’. In this blog, we’ll explore what accelerated depreciation is, how it works, and how businesses in India can benefit from it.

Understanding Accelerated Depreciation:

Depreciation is the gradual reduction in the value of an asset over time. In the context of solar investments, accelerated depreciation allows businesses to write off a higher percentage of the solar assets’ value in the early years of their useful life. This means businesses can enjoy tax benefits sooner, providing a powerful incentive to invest in solar energy.

How Accelerated Depreciation Works:

Let’s break down how accelerated depreciation works with a simple example:

Imagine a business invests 1,00,000 INR in a solar power plant.

1. Normal Depreciation:

   – Traditional depreciation methods might spread the deduction evenly over the asset’s useful life, let’s say 10 years.

   – In this case, the business could deduct 10,000 INR (1,00,000 INR / 10 years) each year.

2. Accelerated Depreciation:

   – With accelerated depreciation, the business can front-load the deductions, allowing them to write off a higher percentage in the initial years.

   – For instance, the business might be allowed to deduct 40% of the asset’s value in the first year, resulting in a deduction of 40,000 INR (1,00,000 INR * 40%).

By utilizing accelerated depreciation, the business can significantly reduce its taxable income in the early years, leading to immediate cost savings.

Benefits for Businesses in India:

1. Faster ROI:

   – Accelerated depreciation accelerates the recovery of the initial investment, helping businesses achieve a quicker return on investment.

2. Tax Savings:

   – Businesses can enjoy higher tax savings in the early years, freeing up capital for further investment or operational needs.

3. Competitive Edge:

   – Companies leveraging accelerated depreciation can gain a competitive advantage by lowering their overall operating costs.

4. Contribution to Clean Energy:

   – Investing in solar power not only benefits businesses but also contributes to India’s clean energy goals, aligning with the nation’s commitment to sustainable development.

Conclusion:

Accelerated depreciation on solar investments provides a win-win situation for businesses in India – it encourages the adoption of renewable energy while offering immediate financial benefits. As the nation continues its journey towards a greener future, leveraging accelerated depreciation can be a strategic move for businesses seeking both economic and environmental sustainability.

MPower is an Authorized Channel Partner of TATA POWER SOLAR bringing to you custom, tailormade solutions for your solar rooftop. Get in touch with us to avail a site survey.

Facebook
Twitter
LinkedIn
Pinterest

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Post

How Does Rooftop System Work?

A solar rooftop system typically consists of solar modules, solar inverter(s) and other electrical components such as meter(s), cables etc. Any excess electricity generated is exported to the national electricity grid and owner’s account is credited accordingly, subject to prevailing regulatory policies.

Get Quote

Download Brochure

    Download Brochure

      Download Brochure

        Download Brochure

          Download Brochure

            Download Brochure

              Download Brochure

                Download Brochure

                  Download Brochure

                    Download Brochure

                      Download Brochure

                        Download Brochure

                          Download Brochure

                            Download Brochure

                              Download Brochure

                                Download Brochure

                                  Download Brochure

                                    Download Brochure

                                      Download Brochure

                                        Download Brochure

                                          Download Brochure

                                            Download Brochure

                                              × How can I help you?