Karnataka has proposed a comprehensive set of cost-cutting incentives in its draft IT Policy 2025-30 to encourage technology investments outside of Bengaluru, including reimbursements for rent, property tax, electricity duty, and telecom expenses if companies establish operations in Tier II and Tier III cities.

Key Highlights

• Karnataka will reimburse rent up to 50 % and property tax outside Bengaluru to attract IT firms.
• The state offers full power-duty waiver and telecom cost relief for IT/ITES units beyond Bengaluru region.

According to the proposed framework, IT and IT-enabled services units built in districts beyond Bengaluru will be eligible for 50% rent reimbursement up to Rs 2 crore, 30% property tax reimbursement for three years, and a 100% waiver of energy charge for five years.

The state would also reimburse 25% of telecom and internet expenditures up to Rs 12 lakh, a one-of-a-kind incentive aimed at lowering operational costs for small and medium-sized businesses.

Bengaluru is home to the majority of Karnataka's IT industries, and while the city generates significant cash for the state and country, its infrastructure is straining to keep up with rising demand.

The incentive is part of a larger Rs 445 million policy outlay spread over five years, with the Finance Department allocating Rs 345 crore for fiscal incentives and Rs 100 crore for interventions.

Aggressive fiscal drive to construct new technological centers

The goal is to relocate technological jobs and investments to places like Mysuru, Mangaluru, Hubballi-Dharwad, Kalaburagi, Belagavi, Shivamogga, and Davanagere.

The government has limited each reimbursement category to 100 applications, indicating a focused commitment to establishing early anchor units in certain regions.

According to the draft paper, rent and property tax rebates are meant to overcome a significant cost barrier for IT firms considering development outside of Bengaluru, where infrastructure shortages, lower talent density, and higher initial real-estate risk have historically hampered uptake.

The state intends to speed the establishment of new innovation clusters by cutting both capital and operating expenditures over the first three to five years.

Beyond Bengaluru: Central to New Policy

The strategy is a dramatic departure from prior IT strategies, which were mainly geared toward Bengaluru.

Nearly all fiscal incentives in the draft policy, such as recruiting assistance, internship reimbursements, telecom subsidies, talent migration assistance, and R&D incentives, have now been extended to Beyond Bengaluru as key eligibility requirements.

Also Read: Govt Approves Rs 27,000 Cr Bengaluru Business Corridor Project

Industry push and workforce readiness

The incentives come amid considerable industry demand for alternative locations to relieve pressure on Bengaluru's stressed infrastructure and tap into a larger talent pool.

As part of the overall policy, the administration has suggested labor concessions, single-window clearances, and a uniform digital platform to assist IT operations throughout the state.

The suggestions will go to the state cabinet for approval.