Abstract— A power quality issue basically deals with any occurrence manifested in current, voltage or frequency deviation that results in damage, upset or failure of end use equipment. The non-linearity in the properties of power electronics devices and the higher switching frequency are the main causes of power quality issue. Thus this paper deals with power quality improvement by shunt active power filter to eliminate voltage and load current harmonics and for reactive power compensation. A shunt active power filter based on the instantaneous active and reactive current component (Id – Iq) method is proposed to compensate first harmonic unbalance. A theoretical study based on synchronous detection method is done in this paper and the simulation results are analyzed regarding the harmonics compensation. Simulations are carried out with PI controller for the (Id – Iq) control strategies for different voltage condition using MATLAB/ SIMULINK.