Karnataka Industrial Policy 2025-30 (Incentives and Concessions)

What is Karnataka Industrial Policy 2025-30?

Karnataka Industrial Policy 2025-30 is the Government of Karnataka's package of incentives and concessions for new manufacturing investment over five years. The Department of Industries and Commerce issued the policy by Government Order No. CI/123/SPI/2024(e) dated 8 February 2025, and the operative guidelines, which set out the forms and procedures for every incentive, were approved by Government letter No. CI 123 SPI 2024 dated 10 April 2026. The guidelines are published by the Karnataka Council for Technological Upgradation (KCTU).

The policy is valid for five years from its enabling order or until a new policy is announced. When it came into operation, Industrial Policy 2020-25 stood withdrawn, though units already sanctioned under earlier policies keep their benefits under their sanction orders.

Related schemes: People who look up Karnataka Industrial Policy 2025-30 (Incentives and Concessions) often also check Karnataka Journalist Welfare, pension, family pension and accreditation benefits, Karnataka Incentive Scheme for Sericulture Reelers, Karnataka Krishi Yantrikarana Yojane (Farm Mechanization Equipment Subsidy), Karnataka Housing Board Affordable Housing Scheme (site, house and flat allotment), Overseas Educational Loan Scheme (Karnataka Minorities Development Corporation), Ganga Kalyana Irrigation Scheme, Karnataka Minority Post-Matric Fee Reimbursement Scholarship, Karnataka Student Bus Pass Scheme (KSRTC, BMTC, NWKRTC and KKRTC concessional student passes) and Raitha Siri Scheme. See also all Karnataka government schemes.

Incentives are available for new enterprises and for expansion, diversification or modernisation of existing units, mainly in manufacturing and in the specified service activities listed in Annexure 4 of the policy. For an expansion to qualify, the unit must invest additional new capital of at least 25 percent of its existing fixed assets.

How are taluks grouped into zones?

Taluks are grouped into three zones by industrial backwardness, and the subsidy depends on the zone where the unit is located:

• Zone 1: the most industrially backward taluks, with the highest rates.
• Zone 2: intermediate taluks.
• Zone 3: the most developed taluks, including all Bengaluru Urban taluks. The capital subsidy tables say Zone 3 rates apply only in Bengaluru Rural district, and the large-unit section says financial incentives in Zone 3 are limited to Bengaluru Rural. Units in Bengaluru Urban should confirm any other concession with the District Industries Centre.

On top of this, taluks classed as most backward or more backward by the Dr. D.M. Nanjundappa Committee get an extra 5 percent or 3 percent of fixed asset value as capital subsidy (up to Rs 5 lakh or Rs 3 lakh for micro, Rs 10 lakh or Rs 5 lakh for small, Rs 50 lakh or Rs 25 lakh for medium units).

What does the policy give MSMEs?

The guidelines define enterprise size for incentives by investment in plant and machinery: micro below Rs 1 crore, small Rs 1 crore to Rs 10 crore, and medium Rs 10 crore to Rs 50 crore. Subsidy is calculated on the value of fixed assets (VFA): land, building, plant and machinery and other productive assets.

Capital subsidy for micro enterprises

Capital subsidy for small enterprises

Special category means units set up exclusively by SC/ST, women, minority, physically challenged or ex-servicemen entrepreneurs. Subsidy for micro and small units is paid in two instalments.

Medium enterprises choose one base subsidy when they file: either a capital subsidy of 25 percent of VFA up to Rs 10 crore in Zone 1, 20 percent up to Rs 8 crore in Zone 2 or 10 percent up to Rs 4 crore in Zone 3, paid in four annual instalments; or a production linked incentive of 2.5, 2 or 1 percent of net sales a year for up to 7 years, capped at 60, 60 or 30 percent of VFA.

Other MSME incentives

• Land conversion fee reimbursement: 100 percent in Zones 1 and 2, and 75 percent for special category units in Zone 3, paid after commercial production.
• Power subsidy: Rs 1 per unit for 3 years for micro and small units in Zones 1 and 2, claimed every six months in June and December.
• Exemption from tax on electricity tariff: 100 percent for 6 to 8 years in Zones 1 and 2, and 4 years for special category units in Zone 3. The guidelines say no certificate will be issued until the Energy Department issues its notification under this policy.
• Stamp duty exemption and concessional registration: 100 percent with registration at Rs 1 per Rs 1,000 in Zones 1 and 2, and 75 percent for special category units in Zone 3. Until the Karnataka Stamp Act is amended, units get these under the 2020-25 policy instead.
• Quality certification: one-time reimbursement for ISO certification from a NABCB-accredited body and BIS product certification, claimed from the Managing Director, KCTU.
• Export certification: refund of 50 percent of the cost of certifications such as CE, China Compulsory Certification and good hygiene practices, up to Rs 5 lakh per entity in all zones.
• Sustainability linked incentives for effluent treatment, recycling and similar investments.

What does the policy give large units?

Large (fixed assets up to Rs 300 crore), mega (Rs 300 crore to Rs 1,000 crore) and ultra mega (above Rs 1,000 crore) projects choose a base subsidy: a capital expenditure subsidy of 25, 20 or 10 percent of VFA by zone, paid in five instalments, or a production linked incentive. Boosters are available for employment, women's participation in the workforce and co-location of R&D with manufacturing, along with stamp duty exemption, land conversion fee reimbursement, and subsidies for logistics and warehousing, industrial dormitories and sustainability measures. These are sanctioned by a State Level Committee chaired by the Commissioner for Industrial Development.

Who is eligible?

• A new enterprise that invests in fixed assets after the policy was announced, or an existing unit undertaking expansion, diversification or modernisation with at least 25 percent new investment.
• A manufacturing enterprise, or a service enterprise of a type listed in the policy.
• A unit that starts commercial production within three years of approval by the District or State Level Single Window Clearance Committee, or of taking possession of land or building plan approval if it did not seek that approval.
• A unit that employs at least 70 percent Kannadigas overall and 100 percent in Group D posts.

Who cannot apply?

• Enterprises listed in Annexure 5 of the policy as not eligible, wherever located (they can still get subsidy for new effluent treatment plants).
• Units whose land, building or machinery was bought through SFC Act, SARFAESI or debt recovery proceedings, except for new expansion investment.
• Units that had taken all the effective steps under the 2020-25 policy before the new order, or already availed 2020-25 incentives for the project. They stay under the 2020-25 policy.
• Units wanting to take benefits partly under this policy and partly under another state policy. A unit must choose one, though ESDM, aerospace and EV policy units may choose this policy instead.
• MSMEs that miss the 12-month deadline after commercial production for the investment promotion subsidy.

Where an MSME already gets a subsidy on fixed assets under another state or central scheme, only the difference, if any, is sanctioned.

How to apply for the investment promotion subsidy

1. Get project approval. Take approval from the District Level Single Window Clearance Committee (DLSWCC) or the State Level committee where required, and start commercial production within three years.
2. Collect the certificates. Get the investment certificate from your bank or KSFC (financed units) or a chartered accountant (self-financed units), the civil engineer or architect certificate, and keep your first sale invoice.
3. Fill the forms. Complete the Common Application Form (Annexure 12.1) and the investment promotion subsidy application (Annexure 12.2), with the employment declaration (Annexure 12.6).
4. Submit within 12 months of commercial production, through the portal, online or physically. MSME applications go to the Joint Director of the District Industries Centre.
5. District Level Committee decision. The DLC, chaired by the Joint Director of the DIC with the Lead District Manager, KSFC, KSPCB and Zilla Panchayat as members, scrutinises and sanctions the subsidy.
6. Execute the undertaking and receive payment. Sign the undertaking (Annexure 12.9), submit annual turnover statements as asked, and the subsidy is released in instalments.

Applications for large and above projects go to the Commissioner of Industries or the Additional Director (P&P).

Where to get help

The Joint Director, District Industries Centre of your district handles MSME claims, and KCTU handles quality certification incentives. The operative guidelines and the earlier 2020-25 schemes are on the KCTU website, kctu.karnataka.gov.in. The State Level Coordination Committee settles any ambiguity in how the incentives are administered.