Accelerated Depreciation and Its Impact on Renewable Energy Investment

Accelerated depreciation remains one of the most effective financial incentives for renewable energy investments in India. Under Section 32 of the Income Tax Act, wind and solar assets qualify for 40 percent depreciation on a written down value basis, along with an additional 20 percent depreciation for new plant and machinery in the first year.

This allows businesses to recover up to 60 percent of the asset cost through depreciation in the first year itself. For a project valued at ₹3.50 crore, this translates into a significant reduction in taxable income and immediate tax savings.

The Financial Impact

The tax shield generated in the first year reduces the effective cost of the project and accelerates the payback period. Combined with ongoing energy savings, this creates a compelling investment case for profitable manufacturing businesses.

“Accelerated depreciation effectively acts as a direct financial return from the government.”

Eligibility requires ownership of the asset and sufficient taxable income to offset the depreciation. For companies that meet these criteria, implementing renewable generation systems shifts the economics aggressively in favor of the property owner.