Solar Tax Benefits Pakistan 2025: Section 235C Explained Simply

As solar adoption grows across Pakistan, many residential and commercial users are asking:
“Can I get tax relief for installing solar panels?”
The answer is yes — under Section 235C of the Income Tax Ordinance 2001.

This article breaks down the solar tax credit Pakistan offers in 2025, how income tax solar deduction works, and what steps you need to take to claim these benefits.

📜 What Is Section 235C of the Income Tax Ordinance?

Section 235C imposes advance tax on electricity bills for non-filers of income tax returns. However, if you’ve installed a net-metered solar system, your electricity bills may be significantly reduced — often to zero — which means no advance tax liability under Section 235C.

👉 Result: You legally reduce your tax burden while enjoying clean energy.

🌞 What Are the Solar Tax Benefits in Pakistan 2025?

1. No Advance Tax on Net-Metered Bills (Section 235C Relief)

If your electricity bill is under Rs. 25,000, you are exempt from the 7.5% tax under Section 235C — and solar helps you stay under this limit easily.

Example:
Before solar: Bill = Rs. 40,000 → Tax = Rs. 3,000
After solar: Bill = Rs. 8,000 → Tax = Rs. 0

2. Claim Depreciation on Solar Equipment for Businesses

Commercial and industrial users can claim depreciation under Section 22, which reduces taxable income.

3. Reduction in Monthly Withholding Tax

Net-metered households consuming under 800 units monthly can now completely avoid withholding tax via solar.

🧾 Income Tax Solar Deduction: How It Works

For filers of income tax (both salaried and business individuals), solar installation costs may be claimed as:

• Capital expenditure (if part of a business asset pool)

• Deductible investment (for some specific business schemes)

You must:

• Keep a valid purchase invoice

• Install the system via a registered AEDB vendor

• Declare the investment in Section D of your annual tax return

💡 Tip: Consult a licensed tax advisor or ACCA/ICAEW consultant to file correctly and avoid rejection.

📈 Solar Tax Credit Pakistan: Benefits Summary

Ali runs a tailoring shop in Lahore.

• Monthly bill (before solar): Rs. 50,000

• Post-solar bill: Rs. 6,000

• Tax savings (Section 235C): ~Rs. 3,300/month

• Income tax deduction on solar setup (Rs. 700,000): Claimed 15% depreciation

Total savings in Year 1 = Rs. 50,000+ in taxes

🧠 Expert Tip: Strengthen Your Tax Filing with Documentation

According to ACCA-certified consultant Imran Khalid:

“Most people forget to attach proper system documentation. Your invoice, wiring diagram, AEDB certificate, and net metering proof all improve the success of your tax claim.”

✅ Collaborate with your solar vendor and a tax professional for maximum benefits.

📌 Key Considerations

• File as a tax-filer (ATL) to be eligible

• Use registered solar companies only

• Maintain invoices + tax withholding slips

• Declare installation value in assets section

• Cross-check for updates in FBR circulars for 2025

🔎 FAQs

Q1: Is solar tax credit available for residential users?

While there’s no direct tax rebate, residential users avoid advance tax and withholding tax via solar.

Q2: Can I get income tax refund on solar system?

Businesses may adjust solar investment against taxable income, resulting in reduced tax — not a direct refund.

Q3: What about sales tax on solar equipment?

Solar panels and inverters are exempt from sales tax under SRO 992(I)/2015.

Q4: Is solar installation deductible for salaried individuals?

Currently, only businesses can claim depreciation or investment deductions, not salaried individuals.

💡 Final Word: Combine Green Energy with Smart Tax Planning

With solar tax credit in Pakistan becoming more favorable and Section 235C pushing non-filers to shift to clean energy, now is the time to act smart.

By installing a system like the BluE-S5000D-M1 through licensed installers and working with a tax consultant, you can enjoy dual benefits:
✅ Save on electricity
✅ Reduce your tax bill