Wind Energy Industry in India – Accelerated Depreciation benefit removed

Posted on April 2, 2012 by

The budget was silent on the financial incentives that would be applicable to wind industry FY2013 onwards. Based on this, it was generally believed by the industry that the Accelerated Depreciation benefit would continue to be available to wind energy installations in FY2013 or till passing of Direct Tax Code. The Central Board of Direct Taxes issued a notification on 30th March 2012, two weeks after the budget being presented. With this, the depreciation on wind mills will be restricted to 15% from the current financial year.This marks a significant change to the incentive structure. Accelerated depreciation benefit typically increased the project IRR by around 3-4%, with other factors held constant.With this change, the industry would move strongly towards IPPs driven from typical retail investor driven structure a few years ago. This will expected to improve the overall performance of the sector.

The Notification is reproduced below.

Income-tax (Fourth Amendment Rules, 2012 – Depreciation restricted to 15% on wind mills installed after 31-3-2012

Notification No. 15/2012 [F.No.149/21/2010-SO(TPL)] S.O.694(E), dated 30-3-2012

In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-


1. (1) These rules may be called the Income-tax ( 4th Amendment) Rules, 2012.

(2) They shall come into force on the 1st day of April, 2012.

2. In the Income-tax Rules, 1962, in the Table, in the New Appendix I, in Part-A relating to Tangible Assets, under the heading “III. Machinery and Plant”, in item (8), in sub-item (xiii), –

(a)        In clause (l), after the words, “which run on wind mills”, the words, figures and letters, “installed on or before 31st day of March, 2012”, shall be inserted ; and

(b)        In clause (m), after the words, “running on wind energy”, the words figures and letters, “installed on or before 31st day of March, 2012”, shall be inserted.



 ( J. Saravanan )

Under Secretary (TPL-III)

Note.-  The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section(ii), vide Notification number S.O.969(E), dated the 26th March, 1962 and last amended by Income-tax ( 3rd Amendment) Rules, 2012, vide Notification S.O. No. 626(E) dated the 28th March, 2012.

Posted in: Renewable Energy