Solar ROI Calculation for Commercial Projects in India

Commercial solar buyers in India have a financial advantage that residential customers don't: Accelerated Depreciation (AD) under Section 33 of the Income-tax Act, 2025 (formerly Section 32 of the 1961 Act). A factory owner installing a 100 kW system doesn't just save on electricity, they can claim 40% of the asset value as a depreciation deduction in Year 1 (Appendix I, Income-tax Rules, 2026), reducing taxable income. For a business paying tax at 25 to 30%, that is a tax saving of about 10 to 12% of the system cost in Year 1, if the plant is put to use for 180 days or more in that tax year.

The residential ROI calculation (covered in detail in our companion guide on solar ROI calculation for residential systems) uses three variables: system cost minus subsidy, then bill savings. Commercial ROI is fundamentally different, the tax structure changes everything. This guide walks through a complete 100 kW example with a full ROI stack, and gives you the framework to replicate it for any commercial system size.

The Commercial Solar ROI Stack, five layers, one outcome

The Commercial Solar ROI Stack is the named framework for commercial solar financial analysis. Unlike residential ROI (which has one primary financial driver, bill savings), commercial ROI has five distinct income streams that must all be quantified before quoting payback to a business owner.

1. 1

   Layer 1: Annual electricity bill savings

   The same calculation as residential, solar generation × the tariff the customer actually pays. For commercial consumers on HT (High Tension) or LT (Low Tension) industrial tariffs, take the effective rate from the customer's own bills: total bill divided by units consumed, which captures demand charges and power factor penalties. This is often the largest single benefit layer.

2. 2

   Layer 2: Accelerated Depreciation (AD) tax shield, the biggest single benefit

   Under Section 33 of the Income-tax Act, 2025 and Appendix I of the Income-tax Rules, 2026, solar power generating systems are listed at 40% depreciation on the written down value. Year 1 is 40% of the cost (the half rate applies if the plant is put to use for fewer than 180 days in the tax year). The rest is depreciated at 40% of the remaining value each year. For a business with taxable income, the Year 1 tax saving is 40% × system cost × the business's effective tax rate.

3. 3

   Layer 3: Renewable Energy Certificates (RECs)

   Some renewable plants can earn RECs through a CERC-approved registry, one REC per MWh. Whether a rooftop plant that is net-metered with a DISCOM is eligible, and what a REC sells for, depends on CERC rules and the market. We did not verify either in this review, so the worked example below includes no REC income. Add it only after the registry confirms eligibility.

4. 4

   Layer 4: Net metering / export income

   For commercial sites where solar generation exceeds daytime consumption (e.g., manufacturing plants that run single shifts), surplus power may be exported to the grid, a process our MSEDCL net metering guide walks through step by step. The credit rate for exported units is set by the state regulator and differs by state and consumer category, so read it from your DISCOM's order. The worked example below assumes no exports.

5. 5

   Layer 5: Financing cost (subtract this if taking a loan)

   If the business takes a commercial solar loan (at the lender's quoted rate), the annual interest expense must be subtracted from the ROI stack. However, interest on a business loan for a productive asset is itself tax-deductible, so the after-tax financing cost is lower. Many commercial buyers use a mix of their own capital and debt to optimise the AD benefit, and checking current bank and NBFC solar loan rates before structuring the deal helps pin down the real after-tax cost.

40% Accelerated Depreciation explained, how it works, who qualifies

Accelerated Depreciation (AD) for solar assets sits in Section 33 of the Income-tax Act, 2025 (in force from 1 April 2026; formerly Section 32 of the 1961 Act), with the rates in Appendix I of the Income-tax Rules, 2026, published on the Income Tax Department site (checked 31 October 2026). The key provisions:

Appendix I of the Income-tax Rules, 2026 lists "Renewable energy devices", including solar power generating systems, at 40% under the Written Down Value (WDV) method. The same 40% applies each year to the remaining value. Section 33(4) halves the rate for an asset put to use for fewer than 180 days in the year it is acquired.

This means: if you install a ₹55 lakh solar system, you can claim ₹22 lakh (40% of ₹55 lakh) as a business expense in Year 1, and this explanation of how EPCs walk factory owners through claiming this benefit is a useful reference for reps new to the pitch. If your company is in the 25% tax bracket, this generates a tax saving of ₹22 lakh × 25% = ₹5.5 lakh in Year 1 alone (at an assumed 25% rate), without any reference to electricity savings.

In Year 2, the remaining book value (₹55 lakh − ₹22 lakh = ₹33 lakh) is again depreciated at 40%, giving ₹13.2 lakh in Year 2 depreciation. This continues until the asset is fully written down, a schedule laid out year by year in our accelerated depreciation guide.

Who qualifies for Accelerated Depreciation on solar? Any Indian company, partnership firm, LLP, or proprietorship that:

• Owns the solar system (not on a PPA/lease arrangement where ownership stays with the developer)
• Uses it for business purposes (not a residential home)
• Is registered under the Income Tax Act and files regular returns
• Puts the system to use in the tax year of the AD claim (the half rate applies if it is used for fewer than 180 days that year)

Full 100 kW system ROI breakdown, working example

Let's run an illustrative Commercial Solar ROI Stack for a 100 kW rooftop system on a manufacturing plant in Pune (MSEDCL zone), sized using the same commercial solar sizing methodology EPCs use to right-size a plant against a factory's load profile. Every input below is an assumption for illustration, not a quote or a forecast. The buyer is assumed to pay tax at an effective 25%.

The 100 kW calculation (all inputs assumed):

System details: 100 kW capacity, assumed 4 units per kW per day (a round figure for illustration; your site's generation depends on location, shading and tilt), so 400 units/day and 146,000 units/year.

Layer 1, Annual bill savings: assumed effective rate ₹8.00/unit, taken from the customer's bill as total bill divided by units. 146,000 units × ₹8.00 = ₹11,68,000/year. This assumes every unit is used on site and ignores tariff changes and module degradation.

Layer 2, AD tax savings: depreciation at 40% of the remaining value each year, tax at an assumed 25%.

Year	Opening value (₹)	Depreciation at 40% (₹)	Tax saved at 25% (₹)
1	55,00,000	22,00,000	5,50,000
2	33,00,000	13,20,000	3,30,000
3	19,80,000	7,92,000	1,98,000
4	11,88,000	4,75,200	1,18,800

Layer 3, REC income: nil in this example (eligibility and price not verified).

Layer 4, Export income: nil in this example.

Layer 5, Financing cost: own funds, so nil.

Year 1 total benefit = ₹11,68,000 (bill savings) + ₹5,50,000 (tax saved) = ₹17,18,000. The investment is ₹55,00,000.

Cumulative benefit: Year 1 ₹17,18,000; Year 2 adds ₹11,68,000 + ₹3,30,000 = ₹14,98,000 (total ₹32,16,000); Year 3 adds ₹11,68,000 + ₹1,98,000 = ₹13,66,000 (total ₹45,82,000); Year 4 adds ₹11,68,000 + ₹1,18,800 = ₹12,86,800 (total ₹58,68,800).

Simple payback: the ₹55,00,000 is recovered during Year 4: ₹55,00,000 − ₹45,82,000 = ₹9,18,000 still to recover at the start of Year 4, and ₹9,18,000 ÷ ₹12,86,800 = 0.71 of the year. Payback is about 3.7 years on these assumptions. This ignores operation and maintenance cost, inverter replacement, degradation and tariff changes, so treat it as an upper-end estimate for the quote.

The payback is quicker than bill savings alone because the depreciation tax savings arrive in the first four years. Without them, the same plant needs ₹55,00,000 ÷ ₹11,68,000 = about 4.7 years. The tax saving is real only if the business has enough taxable profit to absorb the depreciation, so check that before you quote it.

For more on the installed cost components in a 100 kW system, see our detailed 100 kW solar price guide. For smaller commercial systems, see 10 kW solar price, and for the megawatt-scale version of this math, see our 1 MW solar power plant cost guide.

Accelerated Depreciation vs PM Surya Ghar, choosing the right vehicle for commercial buyers

Commercial rooftop solar buyers cannot use PM Surya Ghar: the MNRE guidelines (July 2025, clause 5(d)) give no central financial assistance to non-residential consumers, including commercial and industrial. A commercial site installs as a business asset and claims AD instead.

A business owner can use PM Surya Ghar on a residence and the AD route on the business premises. They are separate installations with separate rules.

For more on GST rates for commercial solar EPC contracts (5% on goods from 22 September 2025, and the service portion under entry 38 of notification 11/2017-CT(Rate), at 9% CGST or 18% IGST; 70% × 5% + 30% × 18% = 8.9% as arithmetic for an inter-State supply), see our guide on GST on solar systems in India. For the solar panel-specific tax treatment, see HSN code and GST rate for solar panels.

Commercial solar tariff comparison, why commercial buyers save more per unit

Commercial and industrial electricity consumers in India typically pay higher effective tariffs than residential consumers. This is driven by demand charges (a fixed monthly charge per kVA of sanctioned load), time-of-day pricing on HT connections, and power factor penalties for loads that draw reactive power.

Do not copy a tariff from a table when you quote. Use the customer's own bills. The effective rate is the total bill (energy charge, demand charge, power factor adjustments, duty) divided by units consumed, averaged over 12 months. Tariff orders are published by each state regulator and DISCOM, and they change every year, so check the current order for the customer's category.

The effective rate including demand charges is the right number to use for ROI, not just the energy charge on the tariff schedule. A factory paying a given energy charge per unit but also paying a monthly demand charge for its sanctioned load is effectively paying more per unit when demand charges are spread across consumed units. Solar reduces the units drawn from the grid, which reduces both energy charges and, in some tariff structures, helps reduce the measured maximum demand (if solar covers peak loads), lowering demand charges too.

RECs, who can earn them and how to get started

Renewable Energy Certificates (RECs) are market-based instruments under CERC regulations. Eligible plants register with the approved registry and earn one REC for every 1 MWh of verified generation, and this REC certificate mechanics explained resource describes the registration and trading process.

The primary use case for RECs is compliance with Renewable Purchase Obligations (RPOs), state electricity regulators require distribution companies, open access consumers, and captive power plants to source a minimum percentage of their power from renewable sources, a full Renewable Purchase Obligation definition is available in our glossary for reps who need the precise regulatory language. Those who cannot generate renewable power themselves can buy RECs from those who can.

Who can register for RECs: this depends on CERC's REC regulations and on how the plant's power is accounted for (self-use, net metering or sale to a DISCOM). We did not verify the eligibility rules for rooftop plants in this review. Ask the registry or your regulatory consultant before you promise REC income to a customer.

Do not assume: that a plant under PM Surya Ghar or any subsidy scheme can also earn RECs, or that a net-metered rooftop plant can. Check the current rules first.

If REC eligibility is confirmed for a customer's plant, show REC income as a separate line, clearly marked as market-dependent, and keep it out of the payback figure. Never fix a REC price in a proposal.

ROI under different financing scenarios, owned vs loan

Building the commercial ROI into your sales proposal

The commercial solar ROI Stack, when presented in a proposal, does something powerful: it reframes the conversation from "cost of solar" to "return on investment." A factory owner who sees ₹5.5 lakh of Year 1 tax savings (at an assumed 25% rate) on a ₹55 lakh investment starts treating it as a business decision rather than a cost.

The timing angle matters: depreciation starts in the tax year the plant is put to use. Plant used for fewer than 180 days that year gets the half rate (20%), and a plant that slips from March to April moves the whole first-year claim to the next tax year. Ask your CA how this affects the customer, and running the numbers through a live solar ROI calculator helps the buyer see what is at stake before they decide to wait.

For how to structure ROI in your proposals, see how to show ROI in a solar proposal and solar proposal payback period best practices. For the residential ROI equivalent, see solar ROI calculation for residential systems.

The cost structures for commercial systems at different sizes, plus the GST treatment (5% goods and the service portion under the 70:30 rule), are covered in solar installation cost breakdown and solar cost per watt in India.

How Quickest Solar CRM helps EPC teams close commercial deals faster

Picture an illustrative ops lead at a Pune EPC with 15 sales reps. The problem isn't understanding the AD benefit, it's making sure every rep presents it consistently and correctly. One rep shows AD, another doesn't. One uses ₹8/unit commercial tariff, another uses ₹6. The proposals look different, the payback numbers don't match, and the ops lead spends Monday mornings fixing versions before they go out.

Quickest Solar CRM proposal templates carry your logo, items, product photos and terms and conditions, so every rep starts from the same layout, and you share the proposal PDF on WhatsApp. Put your agreed AD and payback assumptions in the template terms so the proposals tell one story. The owner sees the deals in the lead pipeline stages without chasing status updates.

• Proposal Generator, templates with your logo, items, product photos and terms; PM Surya Ghar subsidy applied in the proposal for residential quotes; share the PDF on WhatsApp.
• Pipeline Management, customisable lead stages, labels and follow-up reminders; filter leads to see where your commercial deals are.
• Sales Reports, dashboard and team report so your ops lead can see activity and pipeline by team member.

What to do this week, for your EPC

1. 1

   Add the AD benefit calculation to every commercial proposal you send this week

   Take your next 3 commercial proposals in the pipeline. Add a row showing: "Year 1 Accelerated Depreciation tax benefit (40% × system cost × 25% tax rate) = ₹X." Note in the lead's activity log whether the number changed the conversation.

2. 2

   Plan the commissioning date around the 180-day rule

   Depreciation is claimed for the tax year the plant is put to use. A plant used for 180 days or more before 31 March gets the full 40%; a plant used for fewer days gets half (Section 33(4)). Count back 180 days from 31 March, which lands around the start of October, and use that date in your outreach: "Put it to use by early October and the first-year depreciation is the full 40%." It is a real rule, not a manufactured deadline. Your CA confirms the day count.

3. 3

   Ask your CA to confirm the AD rate and current depreciation table for solar

   The 40% rate is the one in Appendix I of the Income-tax Rules, 2026 (checked 31 October 2026), but rates can change. Confirm the current rate from your CA before quoting the AD benefit to commercial customers, and always caveat in the proposal that "tax benefits are subject to your applicable tax status; consult your CA for personalised advice."

Frequently asked questions

What is Accelerated Depreciation for solar in India?

Accelerated Depreciation (AD) for solar power generating systems in India is depreciation at 40% of the written down value under Section 33 of the Income-tax Act, 2025 (formerly Section 32 of the 1961 Act), at the rate in Appendix I of the Income-tax Rules, 2026. It lets businesses that own solar systems claim 40% of the asset's value as a deduction in the first year (half that if used for fewer than 180 days), with the remaining value depreciated in later years. For a business paying tax at an assumed 25% installing a ₹55 lakh system, this is ₹5.5 lakh of tax saved in Year 1. AD applies to companies, partnerships, LLPs, and proprietorships that use the solar plant for business purposes.

Does PM Surya Ghar subsidy apply to commercial rooftop solar?

PM Surya Ghar Muft Bijli Yojana is designed for residential rooftop solar consumers and does not apply to commercial or industrial properties. MNRE's guidelines (clause 5(d), July 2025) give no central financial assistance to non-residential consumers. Commercial buyers can instead claim 40% depreciation under the Income-tax Act, subject to taxable profit.

What is the GST rate on commercial solar EPC?

Commercial rooftop solar EPC contracts follow the 70:30 rule since 22 September 2025: 70% of the contract value is deemed goods at 5% (notification 9/2025-IGST(Rate)) and 30% is deemed a service under entry 38 of notification 11/2017-CT(Rate), which is 9% CGST or 18% IGST. As arithmetic for an inter-State supply, 70% × 5% + 30% × 18% = 8.9% of the contract value (before 22 September 2025 the goods rate was 12%). The same rule applies to residential and commercial EPC contracts. The EPC can claim ITC on its inputs, though mounting and cables bought at 18% against a 5% goods leg can leave unused credit, which is handled through the inverted duty refund route. The GST-registered commercial customer can claim ITC on the GST charged on the EPC invoice, subject to the usual conditions. Confirm the treatment of your contract structure with your CA. See our detailed guide on GST on solar systems in India for the full framework.

Can a company claim both Accelerated Depreciation and REC income?

AD is an income-tax deduction and REC income comes from a separate CERC process, so one does not cancel the other in principle. The open question is whether a given rooftop plant is eligible to register for RECs at all, which depends on CERC rules and how its power is accounted for. We did not verify rooftop eligibility, so check with the registry before you promise REC income. The worked example in this post includes none.

How much does a 100 kW commercial solar system cost in India?

The example in this post assumes ₹55 lakh all-in for 100 kW, purely for illustration. Real quotes vary by state, roof type, inverter brand and module quality, so use your own supplier quotes. See our detailed 100 kW solar price guide for the cost components.

How does Accelerated Depreciation work if the system is installed mid-year?

Section 33(4) of the Income-tax Act, 2025 restricts depreciation to 50% of the prescribed rate if the asset is acquired during the tax year and put to use for fewer than 180 days in that year. For solar at 40%, that is 20% in the first year. Counting back 180 days from 31 March lands around the start of October. Your CA should confirm the day count for your case.

Is REC income taxable for a commercial solar plant owner?

Income from selling RECs is generally business income like other receipts, and your CA decides the treatment. We assume no REC income in the worked example, so it does not change the payback shown.

What happens to Accelerated Depreciation if the solar system is sold?

If a business sells the solar system before it is fully depreciated, the sale proceeds are compared against the written-down book value. Treatment of the surplus or shortfall depends on the asset block rules, which your CA applies. Businesses planning to sell the property, including the rooftop solar installation, should discuss the tax implications with their CA before the sale.