Accelerated Depreciation
Table source: FGE
Accelerated depreciation is a term used to
depreciate the assets in a manner that greater deductions are allowed in
the first few years specially for solar projects. Where as there is no such term in the glossary, appendix or the contents. Normal depreciation is 20% on plant or machinery for any business. But in case of solar power generation plants government of India has allowed to claim 80% depreciation in first year of the commissioning of the solar power plant generation.
Accelerated depreciation can reduce costs during a
company’s start up year. By increasing the deductions taken during the
first few years of business, you will reduce your company’s overall tax
debt.
Depreciation is one aspect of the tax, that facilitates greater
investment in renewable energy and ultimately lower costs for consumers.
In India, Accelerated
depreciation (AD) allows investors, mostly setting up capacity for
captive use, to take advantage of up to 80% of the project cost.
For Example: how AD works in a 1MW solar power generation:
- Project cost (capital cost) to be 800 crores.
- The depreciation amount to be 90% (10 % scrap value assuming)
- Book depreciation (on fixed assets) to be 5.28 % (Dep. As per companies act).
- Tax depreciation rate to be 80% (under Ad benefits)
- Effective tax rate (as per government) to be 33.99
We will take only 5 years to show AD, where as the total life of a solar power plant is taken as 25 years. (though it continues for the entire life cycle of the project). The book
depreciation under the straight line method (as per companies act )
would be the same for every year. The date of commissioning of project is very important and should be taken care while calculation. In this case, it is September month. so the
tax depreciation would be applicable for 6 months in the first financial year April-March. It is very evident that initially the AD
would be very high with, which helps to claim the 80% depreciation in
the first few years itself.
In the II table, we can see the net benefit getting from AD when we
compare it with book depreciation calculated under the straight line
method.
This will have a direct impact on the profits as net income will come
down if depreciation expense is increasing resulting in less tax
burden.
To find out how much the leveled benefit one can avail
(considering the average and fixed tariff adjusted for inflation) in per
unit we calculate the discounting factor. In this case the per unit
tariff is 2.22.
Calculation of AD under solar :
|
Years
|
Unit
|
1
|
2
|
3
|
4
|
5
|
| Book Depreciation |
2.64%
|
5.28%
|
5.28%
|
5.28%
|
5.28%
|
|
| Book Depreciation (Capital cost*Book depreciation) | Rs Lakh |
21.12
|
42.24
|
42.24
|
42.24
|
42.24
|
| Opening | % |
100%
|
60%
|
12%
|
2%
|
| Allowed during the year | % |
40%
|
48.00%
|
9.60%
|
1.92%
|
| Closing | % |
60%
|
12%
|
2.40%
|
0.48%
|
| Accelerated Depreciation | Rs Lakh |
320.00
|
384.00
|
76.80
|
15.36
|
| Net Depreciation Benefit | Rs Lakh |
298.88
|
341.76
|
34.56
|
-26.88
|
| Tax Benefit | Rs Lakh |
101.59
|
116.16
|
11.75
|
-9.14
|
What is Accelerated Depreciation in solar power generation and how can I benefit from it? - See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
What is Accelerated Depreciation in solar power generation and how can I benefit from it? - See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
What is Accelerated Depreciation in solar power generation and how can I benefit from it?
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
What is Accelerated Depreciation in solar power generation and how can I benefit from it?
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
What is Accelerated Depreciation in solar power generation and how can I benefit from it?
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
What is Accelerated Depreciation in solar power generation and how can I benefit from it?
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
There is nothing called Accelerated Depreciation in solar power generation or for that matter in any other field.
At least the IT Act and the Ready Reckoner does not talk about it. There is no such term in the glossary, appendix or the contents.
Depreciation is 20 % on plant and machinery for any business.
In the case of solar power generation, in order to incentivize the entrepreneurs to enter into the solar power generation market, the Government of India has allowed claiming 80% depreciation in year one of the commissioning of the solar power generation plant.
Example: Let us assume that the total project cost is Rs7crores.
- See more at: http://www.eai.in/club/users/aathmika/blogs/25442#sthash.NDp7z6Z8.dpuf
ACCELERATED DEPRECIATION
ACCELERATED DEPRECIATION
ACCELERATED DEPRECIATION
ACCELERATED DEPRECIATION
Great project. Thanks for sharing
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