Solar panel subsidy

Tax Implications of Depreciating a Solar Power System:

1. Tax Deductions: Depreciation of a solar power system can be deducted from taxable income, reducing the amount of tax you owe. Businesses can claim this as part of the Modified Accelerated Cost Recovery System (MACRS) over five years.

2. Investment Tax Credit (ITC): In addition to depreciation, you may also qualify for the federal Investment Tax Credit, which allows you to deduct a percentage of the installation cost of a solar power system from your federal taxes (30% in 2024).

Solar Panel Subsidy:

1. Taxable Income: Any government subsidy or grant received for installing solar panels may be considered taxable income, which could increase your tax liability.

2. Subsidy Impact on ITC: The amount of the subsidy might reduce the eligible costs for claiming the ITC, as you must subtract the subsidy from the total installation cost before calculating the credit.

Always consult with a tax professional for personalized advice. 
For information about solar power, check the website: Solar Power Website. 

Tax implications by type of recipient:

• Individual for home use (PM Surya Ghar subsidy): not income. It is a capital receipt relating to a personal asset, not taxable. Rooftop solar for self-use creates no taxable income; savings on the electricity bill are not income.

• Business: the subsidy for an asset reduces its actual cost for depreciation (Explanation 10 to Sec 43(1)). If not reduced from cost, it is taxable under Sec 2(24)(xviii). Depreciation on solar power plant: 40% for specified renewable-energy devices (Appendix I), else 15%.

• Sale of surplus power to the DISCOM (net metering credits or payments): business income for a business; for individuals, income from other sources.

• GST: the subsidy is directly linked to the price, so under Sec 15(2)(e) it is included in the value of supply unless provided by the Central or State Government. Government subsidies (PM Surya Ghar) are excluded from value. Solar systems carry 12% GST up to 21 September 2025 and 5% thereafter (Notf 9/2025-CT(R)).