Accelerated Depreciation & MNRE 2026 Guidelines
For commercial and industrial (C&I) businesses, rooftop solar offers significant tax benefits. Under the Income Tax Act, businesses can claim up to 40% Accelerated Depreciation (AD) in the first year. In addition, the latest MNRE guidelines effective June 1st, 2026, introduce strict new ALMM requirements for all commercial solar projects.
What is Accelerated Depreciation (AD)?
Unlike residential solar which relies on direct capital subsidies (like PM Surya Ghar), the primary financial incentive for Commercial & Industrial (C&I) solar installations in India is Accelerated Depreciation (AD).
Section 32 of the Income Tax Act allows businesses to depreciate solar power plants at a significantly higher rate than standard plant and machinery. This reduces the taxable income of the business, resulting in massive tax savings in the early years of the project.
| Scenario | Depreciation Rate (WDV Method) |
|---|---|
| Standard Commercial/Industrial Business | 40% of the asset value in Year 1 |
| Manufacturing Businesses (Section 32(1)(iia)) | 40% AD + 20% Additional = 60% total in Year 1 |
| Commissioned for < 180 days in FY | Halved rate (e.g., 20% instead of 40% for the first year) |
To claim the full 40% AD, your solar asset must be commissioned and operational for more than 180 days during the financial year (typically commissioned before October 3rd). If commissioned later, you can only claim 20% in the first year, and the remainder carries over to subsequent years.
New MNRE ALMM Mandate (June 1st, 2026)
While the Income Tax depreciation rules remain steady at 40%, the Ministry of New and Renewable Energy (MNRE) has rolled out major policy changes impacting commercial solar.
Effective June 1st, 2026, the MNRE has strictly enforced the ALMM (Approved List of Models and Manufacturers) List-II mandate across all Commercial and Industrial (C&I) projects, including open access and net-metered rooftop installations.
What does the June 1st ALMM mandate mean?
All commercial solar projects commissioned on or after June 1, 2026, must exclusively use solar modules manufactured by companies listed on the MNRE's ALMM List-II. Use of unlisted imported modules (e.g., non-ALMM Chinese modules) will result in denial of net metering approvals and potential penalties by the DISCOM.
Does this affect the Accelerated Depreciation benefit?
While the Income Tax department handles depreciation, non-compliance with the MNRE ALMM mandate means the DISCOM will refuse to commission your plant. Without a commissioning certificate from the DISCOM, you cannot legally claim the asset is "put to use," which instantly disqualifies you from claiming Accelerated Depreciation for that year.
Are there any exemptions to the June 2026 ALMM rule?
Projects that already received DISCOM feasibility approval and procured modules before the June 1st cutoff may apply for a grandfathering exemption, but this requires specific documentation and is reviewed case-by-case by the State Nodal Agency (SNA).
Financial ROI Example
Let's look at how Accelerated Depreciation dramatically lowers the effective cost of a commercial solar system for a business in the 25% corporate tax bracket.
| Particulars | Value |
|---|---|
| Project Capacity | 100 kWp |
| Total Capital Cost (approx. ₹45,000/kW) | ₹45,00,000 |
| Accelerated Depreciation (40% in Year 1) | ₹18,00,000 |
| Tax Savings in Year 1 (@ 25% tax rate) | ₹4,50,000 |
| Effective Capital Cost after Year 1 tax shield | ₹40,50,000 |
When combined with the direct savings on electricity bills (which often yield a payback period of 3–4 years for C&I consumers), the tax shield provided by Accelerated Depreciation makes commercial solar one of the most lucrative investments a business can make.
Businesses opting for presumptive taxation schemes (like Section 44AD/44ADA) or new tax regimes with lower rates may have different rules regarding AD claims. Always consult your Chartered Accountant to structure the asset capitalization correctly.
SOLGURU provides end-to-end EPC services for commercial and industrial solar, ensuring strict compliance with the June 2026 MNRE ALMM mandate and providing all documentation needed for your AD claims. Get a commercial proposal →