Solar for Factories: Depreciation and Payback Explained

The three numbers that matter

1. Yearly generation. Plant kW x about 4.2 units a day x 365.
2. Avoided tariff. What each self-used unit saves you on your bill.
3. Installed cost. From a firm quotation.

Simple payback = installed cost divided by yearly saving.

A worked example (illustration only)

A 100 kW plant generates about 153,000 units a year. At ₹8 per unit, the yearly saving is about ₹12.2 lakh. At an assumed ₹40,000 per kW, the cost is ₹40 lakh, so simple payback is about 3.3 years. Replace each input with your own figures.

Tax depreciation

Solar plants qualify for depreciation at 40% on the written down value. From 1 April 2026 the rule is in the Income-tax Act, 2025, with the same rate as before. In year one the tax saving is roughly 40% x cost x your effective tax rate, subject to the half-year rule if the plant starts late in the year and to your tax regime. Ask your chartered accountant to confirm.

GST

GST on solar equipment was reduced from 12% to 5% from 22 September 2025. For EPC contracts, the KERC order treats 70% of the contract value as goods at 5% and 30% as services at 18%.

Export tariff

Net-metered commercial plants from 1 to 1,000 kW get ₹3.11 per unit with DCR modules or ₹2.34 per unit with non-DCR modules for surplus energy, under the KERC order of 25 August 2026. Most factories use nearly all generation, so exports are a small part of the return.

Module rules

Net metering projects can commission with an ALMM List-II exemption until 31 December 2026. After that, List-II applies. Ask for the module specification and cost impact.

What to check on the roof

Roof age and strength, sheet type, access, shade from chimneys and neighbouring buildings, and electrical room space. A structural check comes before the final design.

Frequently asked questions

Keep reading