This paper presents an optimization of planning of distribution systems with the allocation of DSTATCOM based on maximization of a net cost profit/savings analysis approach by using the differential evolution algorithm. In the proposed approach, the optimal placement of DSTATCOM, and reactive power compensation at a certain location, and the improvement of voltage profile are obtained by three objective functions: (1) minimization of the size of DSTATCOM, (2) minimization of network power loss, and (3) maximization of net cost profit/savings by minimizing the total planning cost of DSTATCOM installation scheme. Present worth factor is adopted to evaluate the net cost profit/savings of the DSTATCOM installation scheme for a certain planning horizon. The appropriate mathematical modeling of DSTATCOM is used to incorporate it suitably in the forward–backward sweep load flow algorithm of radial distribution networks to provide the reactive power compensation. The recommended method is validated on the IEEE 30-bus, 33-bus and 69-bus distribution networks.