Effect of Tax Incentives on Renewable Energy Investments in India
Varun S. B¹, Deeksha P², Christy J. Kovoor³, Adithyan K. Biju⁴, Dr. Tejaswini. S⁵
¹,²,³,⁴ MBA 2025–27, Faculty of Management Studies, JAIN (Deemed-to-be University)
⁵ Assistant Professor, Faculty of Management Studies, JAIN (Deemed-to-be University)
I. ABSTRACT
India has emerged as one of the most dynamic renewable energy markets in the world, recording a nearly threefold increase in installed renewable capacity from 76.37 GW in 2014 to 220.10 GW by March 2025. This study examines the correlation between direct tax incentives under the Income Tax Act of 1961—specifically Section 32 (accelerated depreciation) and Section 80IA (10-year profit-linked tax holiday)—and this expansion in renewable energy investment. The study relies solely on secondary data from reliable sources such as the Ministry of New and Renewable Energy (MNRE), the International Energy Agency (IEA), the India Brand Equity Foundation (IBEF), and peer-reviewed journals, and demonstrates how fiscal policy is associated with closing the gap between the high upfront economics of renewable energy and the return expectations of private capital.
Key conclusions include: foreign direct investment in the sector increased from USD 1.6 billion in 2022 to over USD 4 billion in 2025 (CEEW, 2025); clean energy investment reached USD 68 billion in 2023, a 40% increase over the 2016–2020 average (IEA, 2024); and the accelerated depreciation mechanism shortens payback periods for commercial solar installations from 7–8 years to 4–5 years. The study also identifies structural constraints, such as Section 80IA’s incompatibility with the concessional corporate tax regime, the ambiguity of the sunset clause, and the asymmetric benefits that favour large, profitable entities. The paper concludes with specific policy recommendations aligned with India’s 500 GW renewable energy target by 2030.
Keywords: Tax Incentives, Renewable Energy Investment, Accelerated Depreciation, Section 80IA, Foreign Direct Investment, Energy Transition
