Subsidies and incentives for solar – these are hotly debated topics.

The main subsidy for solar power is usually in the form of capital subsidy, which is usually a percentage of the total cost of the solar power system.

As of 2017, a capital subsidy of 30% is available from the central government for rooftop solar installations for residential, government, social and institutional segments.  Some state governments also have capital subsidy schemes (usually about 20%) for the same segments – these subsidies are typically over and above the central government subsidies.

Added together, the central and state government subsidies could shave off 50% of the total cost of the solar power plant for select states.

Wow! That sounds like a lot of incentives, doesn’t it?

But take note: These subsidies are not easy to obtain – trying to get money from the government is never an easy task! Besides, many state subsidies are usually only for very small rooftop solar power plants – in many cases, just up to 1 kW.

Last but definitely not the least, neither the central nor the state subsidies are available for commercial or industrial sectors. So, for those putting up solar power plants on their offices or factories, these subsidies do not apply.

Essentially- don’t depend on capital subsidies while installing your solar power plant!

A more relevant and productive financial incentive for commercial and industrial units is the Accelerated Depreciation benefit.

If your business has a taxable profit, this can be offset by taking Accelerated Depreciation on your solar power plant investment, and thus pay a lower tax.

The AD benefit is alive and kicking (even though the extent of benefit has been recently reduced from the earlier 80% to 40% starting financial year 2017), and profit making businesses investing in solar can avail it, wherever they are in solar can avail it, wherever they are in India.

For more details on the Accelerated Depreciation benefit, please see the question “Do I have Tax Benefits if I Invest in Solar?”

Stuff to Remember

Capital subsidies are applicable only for small, residential rooftop solar power systems. Commercial and industrial units can benefit from tax benefits using Accelerated Depreciation.