Subsidy on Solar, Net-Metering & Accelerated Depreciation Tax Benefits

Govt. Subsidy on Solar Panel Systems in India

MNRE (Ministry of  New and Renewable Energy - Central Government) has set the target to install 227 Gigawatt (22,70,00,000 kilowatt) by 31 March 2022. To achieve this target Govt. is promoting solar in many ways. Govt. of India also sectioned an amount of Rs. 5000 crore for solar subsidies only. All detail and procedure to get subsidy on solar panels systems are as below:

How much Solar Subsidy is available?

According to the latest notification by MNRE, 30% to 90% Subsidy on benchmark capital  cost is available for all consumers.
• 90% On Solar Water Pumping Systems for Farmers only.

• 70% For 3 Hill States Himachal, Uttarakhand & Jammu-Kashmir only.

• 30% For all States of India.

Who can get the Subsidy on Solar?

All following consumer categories can get the Govt. Subsidy:

• Domestic:  All residential home owners are eligible to get Govt. subsidy.

• Social Sector: All the registered societies, multi-storey apartments, Cooperative Group Housing Societies are eligible for Subsidy on Solar Systems.

• Institutional: All Schools, Colleges, Institutes are eligible for subsidy.

• Non-Profit Organisations: All the Non-profit organisations including Old Age Home, Orphanage etc are eligible.

Is subsidy available on all solar panel systems?

No, subsidy is only available on Made In India Solar Panels on Grid-Connected Systems.  All following Systems are eligible to get the Govt. Subsidy:

• Solar Water Pumps

• On-Grid Solar System 

HYBRID Solar Systems 

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Procedure to get MNRE Subsidy:

Submit a project report with technical and financial details, operations and maintenance plan along with system monitoring and reporting details to MNRE via district head of your state nodal agency
MNRE evaluates your project on technical and financial points
After your project is approved by MNRE, Open tenders are invited by your state nodal agency and a channel partner will be selected from open bidding process
Channel Partner completes the installation process

MNRE Subsidy Process

MNRE Subsidy Process

SNA inspects your installation to ensure that only MNRE approved components are installed
Subsidy amount is released to channel partner directly from MNRE

You will be responsible for payment of 70% of the system cost, if you chose to finance your solar plant, you may work with you bank to procure financing 70% of the system cost.

Return on investment - ROI on Solar

Residential and Commercial customers who are paying more than 1,500 in monthly electricity bills should consider installing a grid tied solar net metering system to save their electricity bills by 20% – 30%. Look at the ROI Calculator below for details.

Solar Plant

Solar Plant Cost

Govt. Subsidy

Cost After Subsidy

Units Monthly

Savings Monthly

Payback Period







4.5 Years







4.5 Years







4.5 Years







4 Years







4 Years







3 Years

This is an approx estimate:

Net Metering Benefits:

In grid-connected Solar Photo-Voltaic (SPV) systems, solar energy is fed into the building loads that are connected to the public electricity grid through a service connection with surplus energy being fed into the grid and shortfall being drawn from the grid.



Production of surplus energy may happen when solar energy produced exceeds building load energy demand. This surplus is fed into the grid. During the night, or when during the day energy demand in the building exceeds solar energy production, energy is drawn from the grid

Net metering is the net energy between export of generated energy and import of grid energy for a billing month

Accelerated Depreciation Tax Benefits:

Commercial, Private and Industrial customers can leverage Accelerated depreciation benefit, Solar power generation projects have the option of profiting from Accelerated Depreciation benefit by the Central Government, as per Section 32 of the Income Tax Act, 1961. Companies can use this to substantially reduce tax burden in the first few years of the project, up to 100% of the project cost (80% accelerated depreciation and 20% additional depreciation)

Tax benefit on solar

Tax benefit on solar

Under Section 80-IA of the Income Tax Act, 1961 the Central Government provides a 10-year tax holiday, in which the beneficiary has the freedom to choose a 10-year continuous period in the first fifteen years of the project life to avail the tax benefit. The projects are taxed using the Minimum Alternate Tax (MAT) rate, which is significantly lower than the corporate tax rate

The Central Government has mandated concessions and exemptions on specific materials imported for manufacture of solar power generation products as well as for use in solar power generation projects

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Author: Hari Sharan
Updated On: 17/02/2019