Solar Power Financing in India – Key Schemes, Loans, and Incentives for 2025
In the last ten years, installed solar capacity in India has increased by 30 times, making it shine brighter. Installation of solar panels has become a national movement, particularly with the bold schemes, loans, and incentives announced by the government. There is a growing demand for clean power in the domestic, manufacturing, and business sectors that has led India to the 5th spot globally in solar power capacity. India can harness up to 748 GW of solar energy, and this push has led to achieving India’s ambitious goal of 500 GW of non-fossil fuel-based energy by 2030, which is the world’s largest renewable energy expansion plan. The Government of India and various state governments have announced schemes and incentives to make solar energy adoption more affordable in 2025.
Government Solar Panel Schemes and Incentives
The government of India and state governments have announced solar panel schemes, and incentives are a financial boost that helps businesses, domestic users, and industries to install solar panels at affordable prices. The government incentives are in the form of tax credits, rebates, or grants that make green and renewable energy more accessible to homeowners and businesses. The subsidies in initial investment encourage widespread adoption of solar technology among businesses and individuals, promoting environmental sustainability and reducing fossil fuel reliance. Schemes and incentives announced by the government advance national energy goals and lead to the growth of the green economy.
Key Solar Power Schemes and Incentives offered by the Government in India
To encourage solar adoption and investment in renewable energy in the manufacturing sector and industrial setting, the government in India has launched several schemes and incentives. Some of such schemes and incentives include:
- PM Surya Ghar Muft Bijli Yojana: This scheme provides subsidies to domestic users for installing rooftop solar panels. The objective of this scheme is to provide up to 300 units of free electricity per month to around one crore households. Under this scheme, the government also provides a subsidy of 60,000 for systems up to 2 KW and a subsidy of 40% of the cost for 2-3 KW systems.
- PM-KUSUM: This government scheme was launched with the objective of solarising agricultural pumps for farmers. Farmers receive a 60% subsidy to set up solar irrigation pumps. The government also funds farmers for setting up solar power plants of up to 2 MW on their land to sell surplus electricity to DISCOMs.
- Subsidy and Central Financial Assistance (CFA): Residential, social, and institutional sectors receive a CFA of 30% for solar panel installation, while 70% CFA is available for North Eastern and Special Category States.
- Development of Solar Parks: Development of several solar parks and ultra-mega solar power projects is being supported by the government. The government is not only providing financial support but also designating entities such as Solar Energy Corporation of India to act as developers.
- Business Accelerated Depreciation: Businesses in India can claim 40% accelerated depreciation on solar assets in the first year under Section 32 of the Income Tax Act. This further reduces taxable income and project payback periods for businesses.
- Waiver of ISTS Charges: For the sale of solar and wind power for projects that were commissioned by June 30, 2025, Interstate transmission charges were waived.
- Production Linked Incentive (PLI) Scheme
on High-Efficiency Solar PV Modules: This government initiative is designed to minimise dependence on imported solar components. Manufacturers are incentivised to produce high-efficiency solar modules by using locally sourced materials. This scheme drives substantial investments and supports technological advancements in the solar industry.
- State-Level Subsidies: To encourage solar power projects, several states have come up with additional financial top-ups besides the central subsidy. For example, Delhi is providing a subsidy of ₹10,000 per kW (up to ₹30,000), Tamil Nadu is providing a subsidy of ₹20,000 per kW, Gujarat is providing a subsidy of ₹10,000–₹20,000 per kW, and Uttar Pradesh is providing a subsidy of ₹15,000 per kW up to ₹30,000.
Who Finances Solar Projects in India?
Indian Renewable Energy Development Agency, or IREDA, is a major financing arm of the government offering financial help for renewables. This agency offers concessional loans, guides on government subsidy flows, and supports solar power plant developers through tailored products. The IREDA is a main source for term loans and refinances for solar project developers and large commercial installations. Besides this agency, even major banks have products targeted at rooftop solar. For example, SBI offers a specific solar financing scheme with set loan slabs and tenures to financially support rooftop installations in homes. Multiple public and private sector banks, in association with NBFCs, offer home-loan top-ups for solar panels.
Practical Financing Routes for Solar Projects
Individuals and businesses need to be aware of financing routes that are available to them for installing solar power projects in their homes or businesses.
- Individuals, if eligible, can apply for Central Financial Assistance under national programs that have fixed slabs for solar panel installation.
- Companies looking for green business loans for commercial systems can seek loans from SBI or NBFC.
- If the business projects qualify under PSL, then the bank may offer lower interest rates or easier underwriting, as renewable loans are eligible under the 2025 PSL update.
- Individuals who prefer to avoid upfront cost can explore third-party ownership models in which the developer installs, and individuals pay a tariff or lease fee.
- Solar power plant developer looking for large solar projects makes use of a mix of term loans from banks or IREDA, developer equity, green bonds, or institutional refinance.
- IREDA and other nodal agencies are playing a vital role in project viability through concessional lending and steering CFAs, which improves bankability.
The Final Outlook in 2025
Key schemes, loans, and incentives announced by the government for solar panel financing are supporting domestic and commercial solar projects through direct funding and favourable lending classification. The year 2025 has emerged as a beneficial year for solar power projects because of the easy availability of cheaper equipment and green loans that can also be clubbed with CFA, a bank, or NBFC solar loan, and favourable net-metering in the state. Businesses should be aware of state rules and DISCOM tariffs that eventually decide the final economies, so they need to execute a site-specific calculation before deciding.