This paper presents an optimal operation of Photovoltaic based Shunt Active Filter as (PV-SAF) for significant energy conservation, harmonic mitigation and reactive power compensation. When the PV system generates excessive or equal power required to the load demand, then the coordinating logic disconnects the service grid from the load and with a consequent reduction of panel tariff and global warming gasses. The PV module is connected to the DC side of SAF through the DC-DC converter. Converter switch is controlled by fuzzy based Perturb & Observe (P&O) Maximum Power Point Tracking (MPPT) algorithm and it eliminates the drawback in the conventional PV system. The reference currents are extracted by the Fuzzy logic controller based ICosΦ control strategy. This proposed PV-SAF, if connected at the terminals of a small industry or a home or a small enlightening institution can avoid the use of interruptible power supply and individual stabilizer. An emulation using MATLAB Simulink is presented to validate the advantage of the proposed system.