A solar power system can significantly reduce the overall cost of the investment in India due to several tax benefits and financial incentives. Here are the key tax benefits and incentives available:

1. Accelerated Depreciation (For Businesses)

• Under Section 32 of the Income Tax Act, businesses installing solar panels can claim accelerated depreciation of 40%.

• By doing so, you reduce your taxable income, resulting in significant tax savings.

2. GST benefits

• Solar equipment like PV modules, inverters, and related accessories is taxed at a reduced GST rate of 5%, compared to higher rates on other electrical equipment.

• As a result, the upfront cost of installation is reduced.

3. Capital Subsidies (For Residential Users)

• PM Surya Ghar Muft Bijli Yojana offers up to 40% subsidy on residential rooftop solar systems (up to 3 kW capacity).

• Larger systems (3 kW to 10 kW) receive a 20% subsidy.

• This subsidy is available to households through the MNRE and state nodal agencies.

4. Net Metering Benefits

• Under the Net Metering Policy, excess electricity generated by the solar system is exported to the grid, and users receive credits, reducing their electricity bills.

• This provides long-term financial savings.

5. Income Tax Deductions on Loans

• For homeowners and businesses who borrow money for solar installation, Section 80EEB may allow them to deduct interest paid on the loan.

6. Renewable Energy Certificates (RECs).

• Businesses generating solar power can earn RECs, which can be sold on the power exchange market, adding an extra source of income.

7. Customs & Excise Duty Exemptions

• There are exemptions and reductions in customs and excise duties on imported solar components, making solar installations more affordable.

Conclusion

India offers many benefits to solar power investors, including government incentives and tax savings. The accelerated depreciation benefit is available to businesses, while net metering and subsidies are available to homeowners.