Solar Accelerated Depreciation vs Section 115BAA: Which Regime? (2026)

Direct Answer: Does Section 115BAA Keep the Solar Accelerated Depreciation Benefit?

Yes for the 40%, no for the 20%. Under Section 115BAA (the 22% new corporate regime), a company can still claim the normal 40% accelerated depreciation on a solar plant under Section 32(1)(ii) — but it loses the additional 20% Year-1 depreciation under Section 32(1)(iia). So the choice is:

Old regime (30%/25%): a manufacturer can claim 40% + 20% = 60% Year-1 deduction on a captive solar plant.
115BAA (22%): only the 40% WDV — the 20% additional depreciation is disallowed.

On a ₹1 crore plant commissioned before 1 October, that's a Year-1 tax saving of roughly ₹18 lakh (old, 30%) versus ₹8.8 lakh (115BAA) — but the 115BAA company pays a permanently lower 22% rate on all profit and skips MAT. Which wins depends on your taxable income, not the plant.

Tax position last checked: 18 August 2026. This is general information, not tax advice — confirm with your CA.

The Building Blocks: 40% WDV and the 20% Add-On

The 40% rate. A solar power generating system is depreciable at 40% on the Written Down Value (WDV) method under Section 32(1)(ii) of the Income Tax Act, 1961, read with Appendix I to the Income-tax Rules, 1962 (Machinery & Plant — "renewable energy devices / solar power generating systems"). The rate was cut from 80% to 40% with effect from 1 April 2017 (FY 2017-18 / AY 2018-19) by CBDT Notification 103/2016 under the Finance Act 2016 roadmap, and remains 40% today.

The 20% additional depreciation. Section 32(1)(iia) grants a further 20% of actual cost in Year 1 on new plant and machinery for an assessee engaged in manufacture / production (or power generation). Critically, courts have held this applies to a captive power plant — the assessee only needs to be a manufacturer; the plant need not feed the manufacturing line directly (e.g., PCIT v. Kadodara Power, Gujarat HC). So a manufacturing company installing a captive rooftop solar plant can claim 60% Year-1.

For the full AD mechanics, see our accelerated depreciation guide and solar tax benefits overview.

The 180-Day Rule — the Commissioning Deadline That Moves Cash

The proviso to Section 32(1) halves depreciation — both the 40% and the 20% — if the asset is put to use for less than 180 days in the year of acquisition. Because the financial year runs April–March:

Commission on or before ~30 September → ≥180 days → full 40% (+20%) Year-1.
Commission on or after ~1 October → under 180 days → half (20% + 10%) in Year 1, with the balance additional depreciation in Year 2.

This is the single most valuable timing lever in a solar project. If your EPC schedule can't credibly hit 30 September, it's often better to push commissioning past 31 March into the next FY than to commission in October and lose half the Year-1 deduction. We cover the execution side in factory solar installation shutdown planning.

What Section 115BAA Disallows — and What It Keeps

Section 115BAA(2) computes total income without a list of deductions — and Section 32(1)(iia) additional depreciation is on that disallowed list. But Section 115BAA(2)(iv) expressly preserves depreciation "under any provision of section 32, except clause (iia)."

Depreciation component	Old regime	115BAA (22%)
Normal 40% WDV (Sec 32(1)(ii))	✅ Allowed	✅ Allowed
Additional 20% (Sec 32(1)(iia))	✅ Allowed (manufacturers)	❌ Disallowed
Year-1 total (mfr., before 1 Oct)	60%	40%

The same logic applies to Section 115BAB (15% for new manufacturers): the 40% solar WDV is allowed, the 20% additional depreciation is not.

The MAT Wrinkle in the Old Regime

In the old regime, a large Year-1 solar AD claim can push your normal tax below MAT (15% of book profit under Section 115JB), because book profit uses Companies Act Schedule II depreciation, not the tax AD. If that happens you pay MAT now and carry the credit forward up to 15 years (Section 115JAA, extended from 10 to 15 years by the Finance Act 2017).

115BAA / 115BAB companies are exempt from MAT entirely — but note that any MAT credit already on your books is lost when you opt into 115BAA (CBDT Circular 29/2019). This is often the hidden cost of switching regimes.

Worked Example: ₹1 Crore Captive Solar Plant

Assumptions: manufacturer, commissioned before 1 October (full rates), ignoring surcharge/cess for clarity.

	Old regime (30%)	Old regime (25%)	115BAA (22%)
40% WDV	₹40,00,000	₹40,00,000	₹40,00,000
20% additional	₹20,00,000	₹20,00,000	—
Year-1 deduction	₹60,00,000	₹60,00,000	₹40,00,000
Year-1 tax saved	₹18,00,000	₹15,00,000	₹8,80,000

The old regime wins the Year-1 comparison by ~₹9 lakh on this plant — but the 115BAA company pays 22% on every rupee of profit forever, versus 30%. For a consistently profitable factory, the permanent rate cut usually outweighs the one-time extra 20% depreciation. Run both against your projected taxable income — the breakeven depends on your numbers, and a plant's AD is a one-year event while the regime rate is permanent.

So Which Regime Should a Factory Choose?

Stay old regime if: you have large near-term capital additions (solar + other plant), you can use the 20% additional depreciation and other Chapter VI-A deductions, and your taxable income is modest enough that MAT isn't a chronic problem.

Move to 115BAA if: you're a stable, profitable manufacturer or service business with few remaining deductions, you want the clean 22% rate and MAT exemption, and the lost 20% additional depreciation on solar is small relative to the permanent rate saving.

Either way, the 40% solar AD survives, and the 1 October commissioning deadline matters in both. Confirm the election and the worked math with your CA before commissioning.

Frequently Asked Questions

Can I claim solar accelerated depreciation under Section 115BAA?

Yes — the normal 40% WDV depreciation under Section 32(1)(ii) is allowed under 115BAA. What 115BAA disallows is the additional 20% Year-1 depreciation under Section 32(1)(iia).

What is the accelerated depreciation rate on solar in 2026?

40% on the Written Down Value method, under Section 32(1)(ii) read with Appendix I of the Income-tax Rules. It was reduced from 80% to 40% effective 1 April 2017.

What is additional depreciation under Section 32(1)(iia)?

A further 20% of actual cost in Year 1 for new plant and machinery used by an assessee engaged in manufacture/production (or power generation). It is available only in the old tax regime, not under 115BAA/115BAB.

Does a captive solar plant qualify for the 20% additional depreciation?

Yes, if the owner is a manufacturer — courts have held the plant need not feed the manufacturing process directly. A non-manufacturing commercial consumer does not get the 20%.

What is the 180-day rule for solar depreciation?

If the plant is put to use for fewer than 180 days in the year of acquisition, depreciation is halved. Commission on or before ~30 September for the full Year-1 deduction; on or after ~1 October it halves.

Does accelerated depreciation trigger MAT?

In the old regime it can — large AD reduces normal tax below MAT (15% of book profit), triggering MAT with a 15-year credit carry-forward. 115BAA/115BAB companies are exempt from MAT.