In India, the C&I segment is eligible to avail of 40%-20% depreciation if the solar system installed by them on their premises is operational for 180 days or more. This rule came into effect after 1st April 2017. In case the solar system is operational for less than 180 days in a year, SPV plant owners can claim half of the full year’s depreciation i.e. 30%.
To enumerate the above picture, let’s assume that a commercial entity called ABC Pvt. Ltd. falls under the tax bracket of 30%. If this company invests in general assets worth INR 1 Crore expected to have a life of 20 years, it can claim an annual 5% depreciation on this asset under normal circumstances.
Whereas if the same company, ABC Pvt. Ltd. invests in an SPV plant, which is valued at INR 1 Crore and is expected to have a life span of 25 years, then the company will be able to claim 40% of 30% of INR 1 Crore, which comes out to be INR 12 Lakhs in the first and second year and INR 6 Lakhs in the 3rd year.
Apart from the savings that occur on the electricity bill by installing an SPV plant, accelerated depreciation offers an additional financial benefit to C&I consumers. Not to mention the fact that consumers also safeguard themselves from the steadily rising energy costs produced through conventional sources.
