Indian tax law actively rewards solar investment. Businesses write off 40% of a plant in the very first year, GST on solar equipment has been cut to 5%, and homeowners receive up to ₹78,000 as a direct subsidy. Here is how each benefit works — and a calculator to see your own numbers.
Ordinary plant and machinery is depreciated at just 15% a year. Solar plants are classified as renewable energy devices under Section 32 of the Income-tax Act — and depreciate at 40% per year on the written-down value. Much like Germany's Investitionsabzugsbetrag pulls deductions forward for German firms, accelerated depreciation lets Indian businesses recover a large share of a solar investment through tax in the first years.
A ₹50 lakh plant creates a ₹20 lakh deduction in the first year alone. At a 30% tax rate that is ₹6 lakh of tax saved before the plant completes its first full year of generation — and the remaining value keeps depreciating at 40% of the balance each year after.
Businesses engaged in manufacturing or power generation can claim an additional 20% depreciation on new plant in the first year — up to 60% of the plant cost deducted in year one. Not available to companies that opted into the concessional 22% corporate-tax regime.
To claim the full 40% in year one, the plant must be in use for at least 180 days of the financial year. Commissioned later, you claim half (20%) in year one — the balance simply carries into the following years, so nothing is lost, only deferred.
The GST Council's September 2025 reform reduced GST on renewable energy devices — solar cells, modules, and solar power generating systems — from 12% to 5%.
For full EPC projects billed under the standard 70:30 goods-to-services rule, the effective project tax rate falls from roughly 13.8% to about 8.9% — around ₹20–25 lakh saved per MW on a utility-scale plant, and a meaningfully cheaper rooftop for every home and factory. Lumenkraft quotations already reflect the 5% structure.
Some standalone components (generic inverters, batteries, mounting structures bought separately) still attract 18% — buying as a complete system keeps the concessional rate.
Individuals don't get an income-tax deduction for rooftop solar — instead, the Government pays cash directly into your bank account.
Under PM Surya Ghar: Muft Bijli Yojana, residential consumers receive ₹30,000 per kW for the first 2 kW and ₹18,000 for the third — up to ₹78,000, transferred after commissioning and net-meter installation. A 3 kW system typically covers a household's full consumption, targeting a ₹0 monthly bill. Several states add their own top-up on top of the central amount. And the savings on your electricity bill are, effectively, tax-free income — every unit you generate is a unit you never pay for.
Lumenkraft handles the portal application, DISCOM approvals, and ALMM-compliant equipment required for the subsidy.
See how much of your solar investment comes back through tax. Adjust the numbers to match your project.
Depreciation at 40% on written-down value under Section 32, Income-tax Act.
₹5 lakh — ₹10 crore
Tax saved, year by year
| Year | Opening value | Deduction | Tax saved | Cumulative |
|---|
Indicative calculation for a profitable business on the written-down-value method. Depreciation defers and reduces tax; actual benefit depends on your profits, regime, and MAT position. This is not tax advice — please confirm with your chartered accountant. Lumenkraft provides the commissioning certificates and invoices your CA needs to claim it.
Older articles mention a 10-year tax holiday on power-generation profits under Section 80-IA. That window closed for projects that began after 31 March 2017 — new solar plants rely on accelerated depreciation, the 5% GST rate, and subsidies instead.
Accelerated depreciation offsets taxable business profits. Salaried individuals installing rooftop solar at home can't claim it — for homes, the PM Surya Ghar subsidy plus a near-zero electricity bill is the reward, and it's a very good one.
Send us your load and site details — our proposal includes the depreciation schedule, GST treatment, and subsidy eligibility, ready for your CA.