Tax Benefits Solar Power India

When a business enterprise installs a solar power plant on its roof it gets a tax break what in industry parlance is known as accelerated depreciation.

Tax benefits solar power india.

Note that india has set the target to set up 100 gw of solar power generation capacity by 2022 1giga watt is 1 000 mega watt. Ad benefit in year one is rs1 85 cr. Solar power is being promoted in corporates and private sector by govt of india through tax relief by allowing them to avail higher rate of depreciation more often termed as accelerated depreciation ad benefit under section 32 of income tax act. Commercial private and industrial customers can leverage accelerated depreciation benefit solar power generation projects have the option of profiting from accelerated depreciation benefit by the central government as per section 32 of the income tax act 1961.

While calculating book profits you add depreciation to your expenses and. It works as follows. So the actual project cost of solar power plant for an ad client is rs5 15cr. Taking this immense growth into consideration the ministry of new and renewable energy through its national solar mission of india has set a target of 40 gw power through rooftop solar by 2022.

The installed capacity of solar rooftop augmented from 117 mw to 1250 mw from the period between 2013 to 2016. Accelerated depreciation up to 80 in the first year subsequently 20 in the second year. If you are a profit making company you need to pay corporate tax 35 on your book profits. Income tax for solar power generation units is 80 and it is an accelerated rate of depreciation.

This in return allows the user to claim tax benefits on the value depreciated in a given year. The normal depreciation rate for any general plant and machinery is 15. In june 2015 india announced that it would develop 175 gigawatts gw of renewable energy capacity by 2022. Accelerated depreciation tax benefit.

The accelerated depreciation benefit allows the commercial and industrial users of solar power in india to depreciate their investment in a solar power plant at a much higher rate than general fixed assets. To this end federal and state governments introduced a number of tax and financial incentives to make india s nascent solar and wind sectors appealing for investors. But remember depreciation is 20 on plant and machinery for any business. Tax liability for solar power business in india india with its initiates in the field of.

In india any investments in solar power plants can benefit from an important tax incentive the accelerated depreciation ad benefit. The way forward surely is to rationalise and extend the tax deduction on offer rs 1 5 lakh to also include solar roof top power systems.