Induction motor requires a rotating magnetic for rotation. Current required to generate the rotating magnetic field is magnetizing current. This magnetizing current is associated with the reactive power. This reactive power must be supplied from source side. Therefore, the power factor of the induction motor is low. So, the capacitor is installed on the motor terminals to compensate for the low power factor. Power supply company has recommended to maintain a high power factor to the customer. If the capacitor current is greater than the magnetizing current of the motor, there is a possibility that the self-excitation occurs. So it is necessary to calculate the optimal capacity capacitor current does not exceed the magnetizing current. In this study, we first compute the no-load current and the reactive power of the induction motor and then calculates the limit of the maximum power factor without causing self-excitation.