Installing solar panels at home or for a business in India is a smart investment. It not only reduces your electricity bills but also comes with a range of government subsidies, tax incentives, and state-level benefits. With the Indian government pushing for clean energy, 2025 is the right time to switch to solar. This detailed guide will help you understand the various tax benefits of solar panels in India.
1. Central Government Solar Subsidy – PM Surya Ghar Muft Bijli Yojana
This flagship rooftop solar subsidy scheme was launched to support residential consumers. It offers direct financial aid to reduce the upfront cost of solar installation.
Subsidy Structure (2025 Updated Rates):
- 1–2 kW Solar System: ₹30,000 to ₹60,000 subsidy
- 2–3 kW Solar System: ₹60,000 to ₹78,000 subsidy
- Above 3 kW System: Fixed subsidy of ₹78,000
You also get up to 300 units of free electricity per month, making it highly attractive for middle-class households across India.
Also Read how to install solar panels at home in india, How to Calculate Your Home’s Solar Power Needs in India (2025)
2. State-Level Solar Subsidies in India
Several Indian states offer additional rooftop solar subsidies, helping homeowners and housing societies save more.
Popular State Incentives:
- Delhi: ₹2,000 per kW (up to ₹10,000)
- Uttar Pradesh: ₹15,000 per kW (up to ₹30,000)
- Maharashtra: Up to 25% subsidy under local schemes
- Gujarat: ₹20,000 per kW (maximum ₹1 lakh), with interest benefits on loans
These subsidies are over and above the central government’s incentives.
3. Income Tax Benefits for Businesses Using Solar
If you are a business owner or industrial consumer, solar panel tax deductions make the investment even more worthwhile.
Accelerated Depreciation (Section 32 of Income Tax Act)
- Businesses can claim 40% depreciation in the first year
- Reduces taxable income and gives faster return on investment
Additional Depreciation (Section 32(1)(iia))
- Extra 20% deduction is allowed for new equipment used in power generation
Tax Holiday (Section 80-IA)
- Allows 100% tax exemption on profits for 10 consecutive years (within the first 15 years)
- Applicable to solar power producers and energy service companies
4. GST Benefits for Solar Panel Installation
- Solar modules and equipment: 12% GST
- Installation services: 18% GST
- For composite projects, GST is averaged at 13.8%
This makes solar systems affordable and tax-efficient, especially for larger installations.
5. Solar Loans with Interest Subvention
Banks now offer solar loans at subsidized rates, especially for rooftop installations.
- Interest rates: As low as 5% to 6%
- Interest subsidy: Offered through MNRE or state agencies
- Tenure up to 10 years for repayment
Financing your solar panels has never been easier in India.
6. Net Metering Benefits
Net metering in India allows you to export surplus solar energy to the grid. You receive bill credits, reducing your monthly electricity expenses.
- Available in most states
- Helps offset night-time electricity usage
- Promotes 100% energy utilization
This is an essential advantage that further improves ROI on solar investments.
7. PM-KUSUM Scheme for Farmers
For agricultural users, the PM-KUSUM scheme offers:
- Up to 60% subsidy for solar pumps
- 30% loan assistance
- Farmers only contribute 10% upfront
It allows off-grid farming and additional income by selling extra power to the grid.
8. Customs Duty Waivers and PLI Scheme
To promote domestic solar manufacturing, the government has:
- Waived or reduced import duties on solar raw materials (like EVA sheets, silver paste)
- Launched the PLI Scheme with ₹24,000 crore support to boost solar module manufacturing
This brings down the cost of solar installation and encourages Make in India.
Frequently Asked Questions (FAQs)
Q1: Who can apply for solar subsidies in India?
Any Indian resident with a rooftop and valid electricity connection can apply under government schemes. You must not have availed a similar subsidy earlier.
Q2: Can I get both central and state subsidies?
Yes, but the total subsidy cannot exceed the actual cost of the solar system.
Q3: Are there tax benefits for residential users?
Tax benefits like accelerated depreciation apply mainly to commercial setups. However, residential users enjoy subsidies and lower electricity bills.
Q4: How does net metering work?
It allows you to send extra electricity to the grid and earn credits that reduce your electricity bill.
Q5: What documents are needed to apply for subsidies?
Aadhaar card, electricity bill, bank passbook, property proof, and vendor quotation are usually required.
Conclusion
Solar energy in India is not just about saving the environment. It’s also a great way to cut electricity costs, enjoy subsidies, and gain tax benefits. With both central and state governments offering multiple incentives, installing a solar panel system is now more affordable than ever.
By understanding the solar tax benefits in India, you can make smarter decisions and maximize your return on investment. Whether you’re a homeowner, a business owner, or a farmer, solar energy is the way forward in 2025.
Author- Ayush
