Introduction
India’s push towards clean energy and sustainable infrastructure has brought massive opportunities for businesses and investors in the renewable sector. From solar farms in Maharashtra to electric vehicle (EV) startups in Bengaluru, the government is offering strong tax incentives to encourage green growth.
In this blog, we’ll explore the taxation framework for solar, wind, and EV initiatives, including Section 80-IA/80-IB deductions, customs duty exemptions, and accelerated depreciation benefits. Whether you’re a renewable energy developer, startup, or investor, understanding these provisions can help you maximize savings and remain compliant.
Government Push for Clean Energy in India
- India aims for 500 GW of renewable energy capacity by 2030.
- Schemes like Production Linked Incentives (PLI) for solar modules and EV batteries boost local manufacturing.
- The National Electric Mobility Mission supports EV adoption.
- Maharashtra and other states provide stamp duty waivers, property tax rebates, and state-level subsidies for green projects.
Tax Incentives for Solar Energy Projects
- Section 80-IA deduction for profits from solar power generation and distribution.
- Accelerated depreciation at 40% (previously 80%) for solar assets—helping faster recovery of investments.
- GST concessions on solar equipment (currently 5% on solar panels/modules).
- Customs duty exemption on certain solar components under Make in India initiatives.
Tax Incentives for Wind Energy Projects
- Section 80-IA also applies to wind power producers.
- Historically, 100% depreciation in year 1 was allowed for windmills; now it is 40%, but still attractive.
- Generation Based Incentives (GBI) provided for wind developers under MNRE.
- Import duty benefits for wind turbine components.
Tax Incentives for Electric Vehicle (EV) Sector
- Section 80-IB (11A): Deduction for manufacturing EV parts, batteries, and components in notified backward areas.
- Section 80EEB: Deduction of up to ₹1.5 lakh on interest paid for EV loans (benefit for buyers).
- GST on EVs reduced from 12% to 5%.
- Customs duty exemptions on lithium-ion battery imports (phased manufacturing plan in place).
- PLI scheme offers direct subsidies for EV and battery manufacturers.
Key Tax Provisions Impacting Clean Energy
Section 80-IA: Infrastructure Deduction
- Available for enterprises engaged in generation or distribution of power.
- 100% deduction of profits for 10 consecutive years out of 15 years.
- Beneficial for solar/wind farms and mini-hydel projects.
Section 80-IB: Special Deductions
- Provides incentives for manufacturing units in certain industries, including renewable energy and EV components.
- Particularly useful for SMEs in the EV supply chain in Maharashtra.
Accelerated Depreciation
- Renewable energy devices (solar, wind, biomass, etc.) qualify for 40% depreciation under Income Tax Act.
- Helps businesses recover capital costs faster.
Customs Duty & GST Exemptions
- Exemptions/reduced rates for importing solar cells, EV batteries, charging equipment.
- Lower GST rates (5% on EVs, 5% on solar panels) make projects more viable.
Case Studies from Maharashtra
- Kolhapur Solar Project: A mid-sized solar farm claimed Section 80-IA benefits, reducing taxable profits significantly over 10 years.
- Pune EV Startup: Leveraged Section 80EEB for financing EV purchases and availed PLI scheme benefits for lithium battery assembly.
- Satara Wind Farm: Used accelerated depreciation to recover project costs in just 4–5 years.
Best Practices for Businesses in Clean Energy
- Plan tax strategy early: Claim Section 80-IA/80-IB deductions from the start of operations.
- Use accelerated depreciation wisely: Helps reduce tax burden during high investment years.
- Leverage state incentives: Maharashtra offers additional benefits for renewable developers.
- Stay updated on GST/customs notifications: Rules for solar modules, EV batteries, and wind components change frequently.
- Consult experts: Tax professionals can help structure investments to maximize exemptions.
FAQs
Q1. Can solar companies claim both Section 80-IA and accelerated depreciation?
Yes, but planning is required to optimize benefits across years.
Q2. What is the GST rate on electric vehicles?
Currently, GST on EVs is 5%, compared to 28% on regular vehicles.
Q3. Are there state-specific incentives for clean energy?
Yes. Maharashtra offers stamp duty concessions, subsidies, and additional tax benefits.
Q4. Do wind projects still enjoy 100% depreciation?
No, it is now 40%, but still beneficial for cost recovery.
Q5. Can EV buyers claim income tax benefits?
Yes, under Section 80EEB, up to ₹1.5 lakh deduction on loan interest.
Conclusion
The clean energy sector—covering solar, wind, and EVs—is not only a driver of India’s green future but also a hub of attractive tax incentives. From Section 80-IA/80-IB deductions to accelerated depreciation and GST exemptions, businesses can significantly reduce their tax liability while contributing to sustainability.
👉 At Verotus LLP, we specialize in tax planning for renewable energy companies, EV startups, and SMEs. Whether you’re in Kolhapur, Pune, or Mumbai, our experts can help you structure investments and maximize government benefits.
📞 Contact us today for a free consultation on clean energy taxation strategies.
