Investing in solar energy in Sri Lanka is not only good for the environment — it also brings financial and tax benefits. Whether you’re a homeowner using solar to offset your bills or a business generating solar income, it’s important to understand how solar tax relief and solar income taxation work under Sri Lanka’s tax laws.
Let’s break it down for you.
💸 1. What Is Solar Tax Relief?
The Sri Lanka Inland Revenue Department (IRD) allows taxpayers to claim tax relief on capital expenses made for solar power systems. This applies to both individuals and businesses.
✅ Who Can Claim?
- Individuals (residents) who invest in rooftop solar for personal use or to generate income
- Businesses that install solar as part of their operations
🧾 2. How Solar Tax Relief Works
When you install a solar system, the cost of installation (including panels, batteries, inverters, and installation charges) is treated as a “qualifying payment” under Section 52 of the Inland Revenue Act.
🔹 Relief Limit
| Relief Type | Amount |
|---|---|
| Maximum Claim per Year | Rs. 600,000 OR 25% of Statutory Income |
| Carry Forward of Unused Relief | Yes – for future years |
You can claim Rs. 600,000 or 25% of your total income, whichever is lower, in a given tax year. If you spend more than this, the remaining balance can be carried forward and claimed in future years.
🧮 Example:
| Total cost of solar system | Rs. 1,200,000 |
|---|---|
| Year 1 Claim (2023/24) | Rs. 600,000 |
| Brought Forward Balance | Rs. 600,000 |
| Year 2 Claim (2024/25) | Rs. 600,000 |
✅ After 2 years, you’ve claimed the full amount.
💰 3. Do You Pay Tax on Income from Solar?
It depends on how you’re using your solar power.
🌞 Scenario 1: You Use Solar for Your Own Home
- ✅ No income is generated.
- ❌ No tax is payable.
- ✅ You can claim tax relief on installation costs.
⚡ Scenario 2: You Sell Electricity to the Grid
(e.g. via Net Plus or Net Accounting schemes)
If you earn money from selling excess solar power to the grid (usually through the CEB or LECO), this is considered “income” by the IRD.
🔹 Is Solar Income Taxable?
✅ Yes, solar income is taxable under “Other Income” or “Business Income”, depending on your setup.
🧮 Example Tax Calculation:
| Monthly Solar Income | Rs. 25,000 |
|---|---|
| Annual Solar Income | Rs. 300,000 |
| Added to Your Total Income | Rs. 300,000 (taxable) |
| Tax Rate | Based on income slab |
This income is added to your total statutory income and taxed based on the progressive rates (6%–36%).
📋 4. How to Claim Solar Tax Relief
When filing your annual tax return via RAMIS (Inland Revenue’s online portal):
- Go to the “Qualifying Payments” section
- Select “Investment in Solar Power Systems”
- Enter the amount spent (up to Rs. 600,000 per year)
- If applicable, add any brought-forward balance
- Attach supporting documents:
- Invoice / receipt
- Proof of payment (bank transfer, etc.)
- CEB/LECO agreement (if selling power)
📑 5. Important Reminders
- You can only claim the relief if the solar system is installed on property owned or leased by you
- Keep all receipts and contracts for IRD review
- You must declare any income earned from solar energy
🌍 Final Thoughts
The Sri Lankan government encourages renewable energy adoption by offering generous tax relief on solar installations. Whether you’re looking to cut your electricity bill or generate income, understanding how to correctly apply for tax relief — and declare any solar income — will ensure you’re fully compliant and taking advantage of all the benefits available.
⚠️ Tip: Always consult a qualified tax advisor or accountant to ensure you file your return correctly and maximize your deductions.
