Commercial Solar Subsidy in India 2026: Tax Benefits & Incentives for Businesses

The Short Answer

Commercial and industrial businesses do not qualify for PM Surya Ghar (residential only) but benefit from 40% accelerated depreciation under the Income Tax Act, reducing Year 1 tax liability significantly. Some states offer additional incentives for commercial solar. OPEX/PPA models let businesses go solar with zero upfront investment. For a 100 kW commercial system costing ₹50–₹60 lakh, accelerated depreciation saves ₹6–₹7 lakh in taxes in the first year alone.

Accelerated Depreciation: The Primary Business Incentive

Section 32 of the Income Tax Act allows businesses to claim 40% depreciation on solar assets in the first year of installation:

System CostYear 1 Depreciation (40%)Tax Saving (at 25% rate)Tax Saving (at 30% rate)
₹10 lakh₹4 lakh₹1,00,000₹1,20,000
₹25 lakh₹10 lakh₹2,50,000₹3,00,000
₹50 lakh₹20 lakh₹5,00,000₹6,00,000
₹1 crore₹40 lakh₹10,00,000₹12,00,000

Eligibility: Any business entity that owns the solar system (not leased/rented), files income tax returns, and has sufficient taxable income to absorb the depreciation.

The remaining 60% of the asset value is depreciated at the normal rate (15%) over subsequent years.

Why PM Surya Ghar Doesn't Apply to Businesses

PM Surya Ghar Yojana is exclusively for residential electricity consumers — those with domestic tariff connections from their DISCOM. Businesses with commercial, industrial, or institutional connections are excluded.

This distinction is based on your electricity connection type, not property type. A home office with a domestic connection qualifies; a shop with a commercial connection does not.

However, the accelerated depreciation benefit for businesses often exceeds the residential subsidy in absolute terms — a ₹50 lakh commercial system saves ₹6+ lakh in taxes, compared to the ₹78,000 residential subsidy cap.

CAPEX vs OPEX Models for Commercial Solar

Businesses can go solar through two financial models:

FeatureCAPEX (Buy)OPEX / PPA (Subscribe)
OwnershipYou own the systemDeveloper owns, you buy power
Upfront costFull system costZero
Depreciation benefitYes (40% Year 1)No (developer claims it)
Power rateFree after payback₹3.5–₹5/unit PPA rate (lower than grid)
MaintenanceYour responsibilityDeveloper's responsibility
Contract periodN/A15–25 years
Best forProfitable businesses with tax liabilityBusinesses wanting zero investment

CAPEX with accelerated depreciation gives the highest total savings. OPEX/PPA suits businesses that prefer zero upfront investment and predictable energy costs.

State-Level Commercial Solar Incentives

Some states offer additional incentives for commercial solar beyond the central depreciation benefit:

  • Gujarat: Industrial solar policy with dedicated feeder and open access provisions for large installations
  • Maharashtra: Green energy open access for installations above 1 MW. Net metering available for commercial up to sanctioned load
  • Karnataka: Commercial net metering through BESCOM for systems up to 1 MW
  • Rajasthan: Solar park allotments and open access incentives for industrial consumers
  • Tamil Nadu: Solar RPO (Renewable Purchase Obligation) banking and open access provisions

State incentive structures for commercial solar are more complex than residential and often depend on system size, connection voltage, and industry category. Consult a solar consultant or experienced installer for your specific case.

Net Metering for Commercial Systems

Most DISCOMs offer net metering for commercial rooftop systems, but rules differ from residential:

  • Size limit: Typically up to sanctioned load or 1 MW, whichever is lower
  • Tariff offset: Commercial tariffs (₹8–₹14/unit) are higher than residential, making solar savings proportionally larger
  • Demand charges: Solar reduces peak demand, which can lower demand charges on your commercial bill
  • TOD tariff benefit: Solar generates most during peak hours (10 AM – 4 PM) when time-of-day tariffs are highest

A 50 kW commercial rooftop system in Maharashtra (MSEDCL commercial tariff ~₹11/unit) can save ₹5–₹7 lakh annually.

→ Net metering explained

Solar Financing for Businesses

Multiple financing options make commercial solar accessible:

  • Term loan: Banks offer solar-specific loans at 8–12% interest, 5–7 year tenure. EMI is typically less than current electricity bill
  • Green bonds: Large corporates can issue green bonds to finance solar installations
  • OPEX/PPA: Third-party installs and maintains the system. You pay a fixed per-unit rate lower than grid tariff
  • Equipment leasing: Lease the system with option to buy. Monthly lease < monthly savings

→ Solar loan options and rates

ROI for Commercial Solar Installations

Commercial solar delivers even faster payback than residential due to higher tariffs:

System SizeCostAnnual SavingsPayback (with depreciation)25-Year Savings
10 kW₹5–₹6 lakh₹1.0–₹1.4 lakh3–4 years₹25–₹35 lakh
50 kW₹25–₹30 lakh₹5–₹7 lakh3–4 years₹1.2–₹1.7 crore
100 kW₹50–₹60 lakh₹10–₹14 lakh3–4 years₹2.5–₹3.5 crore

Savings include accelerated depreciation tax benefit. Tariff escalation assumed at 5% annually.

→ Calculate your commercial solar ROI

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Common questions

Is there a government subsidy for commercial solar in India?
There is no direct capital subsidy like PM Surya Ghar for commercial consumers. However, businesses benefit from 40% accelerated depreciation under the Income Tax Act, which provides significant tax savings. Some states offer additional incentives for commercial solar installations.
How much can a business save with accelerated depreciation on solar?
A business can depreciate 40% of the solar system cost in Year 1. On a ₹50 lakh system at a 30% corporate tax rate, this translates to ₹6 lakh in tax savings in the first year alone. The remaining asset value is depreciated over subsequent years at the normal rate.
What is the payback period for commercial solar?
Commercial rooftop solar typically pays back in 3–4 years when combining electricity savings and accelerated depreciation tax benefits. After payback, the system generates essentially free electricity for the remaining 20+ years of its life.
Can a shop or office building install solar with net metering?
Yes. Most DISCOMs offer net metering for commercial establishments up to their sanctioned load. Commercial tariffs are higher than residential, so the per-unit savings are actually larger. Contact your DISCOM or an installer for your specific net metering eligibility.
What is a solar PPA for businesses?
A Power Purchase Agreement (PPA) lets a business go solar with zero upfront investment. A solar developer installs and owns the system on your roof. You buy the generated power at a fixed rate (₹3.5–₹5/unit) — lower than grid tariff. The agreement typically runs 15–25 years.

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