Background Domestic solar PV installations in India are yet to become a valuable proposition for both the prosumers and utility because of the deficiencies in the formulation of the policy parameters. This paper presents a comprehensive analysis of the consumer-centric business model for rooftop solar PV installations in India. We explore areas where potential policy interventions may be introduced to improve collective stakeholder benefits and incentivize more domestic consumers to install rooftop solar panels in their premises. We propose a policy framework that seeks optimal Feed-in Tariff (FiT) rates, PV capacities and Average Billing Rates (ABRs) towards maximizing stakeholder benefits. The stakeholders considered are the consumers/prosumers and the utility. Results Case studies with three residential prosumers of different demand and generation profiles (extracted from data provided by Indian utilities) are presented. A multi-objective problem is formulated with the FiT, generation capacity (as a function of demand) and ABR as decision variables, exploring the various welfare trade-offs. The pareto-optimal front is identified for prosumer and utility benefits and suitable points with reasonable tradeoff are selected based on sensitivity analysis of the impact of the decision variables on collective welfare. Conclusions The paper provides a workflow to fix tariff, FiT and local PV capacities in active residential distribution systems. The suitability of prevailing tariff and FiT rates of three Indian utilities namely, MSEDCL, TATA POWER (Delhi) and TANGEDCO are studied, and their impact on prosumer savings and utility profits is brought out. The paper recommends optimal installation capacities for prosumers based on their load demand so as to encourage the adoption of roof-top solar without affecting collective benefits. This provides policymakers and prosumers an effective decision-making tool.