Discount rate is a useful economic concept that can be used to analyze decisions involving inter-temporal choices such as buying an energy efficient appliance where you have to pay now to reap benefits in future. It is the magnitude of consumer’s preference for present over future value. Discount rates have important policy implications as they can be used to predict consumers’ decisions under a policy and thereby help to evaluate its impact. In energy efficiency policy domain, discount rates have been used to forecast market penetration of energy efficient appliances and evaluate the potential of energy efficiency programs. In this paper, we have reviewed the fundamental concepts of discount rates and their implications for energy efficiency policies. We have also described a specific approach based on discount rates to effectively design financial incentives for energy efficient appliances in India. Further, we have also discussed the limitations of using discount rates based approach and the data challenges that it faces in India before making our conclusions on the same.