Innovation, R&D boost in Karnataka's new IT Policy 2025-30

Bengaluru: With an aim to promote R&D and innovation in the Information Technology and Information Technology-enabled Services (IT/ITeS) sector across Karnataka, the state government will provide incentive of 40% of the eligible R&D expenditure (maximum up to Rs 5 crore) for companies that plan to launch new units or expand in Bengaluru and Beyond Bengaluru.

Companies that are eligible can claim this incentive once under this policy. R&D covers basic research, applied research and experimental development activities.

The Karnataka government in its latest IT Policy 2025-2030, to attract and boost investments in Mysuru, Mangaluru, Shivamogga, Tumakuru, Kalaburagi, Hubballi-Dharwad, and Belagavi, has introduced many incentive packages. Under the new policy, any new IT/ITeS park that will be established Beyond Bengaluru can claim 20% of the eligible capital expenditure (maximum support of Rs 5 crore.)

The focus is more on Artificial Intelligence (AI) capabilities as the state aims to drive inclusive and sustainable growth through the adoption and development of next-generation technologies.

The policy aims to facilitate an enabling framework for IT product development and R&D spanning from early-stage prototyping, to scalable technology solutions encouraging a shift from service-based models to product centric innovation.

The policy targets to generate over 90 lakh direct and indirect jobs, and also increase software exports from Rs 4.09 lakh crore to Rs 11.5 lakh crore, by 2030.

“The policy includes a comprehensive set of enablers on which various initiatives and incentives are designed. These cover critical areas, such as infrastructure development, human capital advancement, industry promotion and commercial enablement, business continuity support, and enhanced ease of doing business,” IT-BT Minister Priyank Kharge said.

He added that besides these, this policy also introduces interventions to proactively address emerging challenges, and encourage return of talent, thus creating a conducive ecosystem for IT companies to thrive, scale, and innovate.

Also, to make Karnataka a leader in the field of AI, a Centre for Applied AI for Tech Solutions (CATS) will be established with an investment of Rs 50 crore, over the next five years.

Future-ready workforce

The policy also highlights the importance of a future-ready workforce and it encourages internship opportunities for students and freshers. Those units which are expanding or opening in Bengaluru and Beyond Bengaluru can claim incentive for internships — about 50% of internship stipend for 3 months and it is capped at Rs 5,000 per month per intern. The number of interns eligible for incentive is limited to 15% of the workforce.

The Karnataka government will provide recruitment assistance to IT/ITeS units that are setting up new or expanding existing operations Beyond Bengaluru. If any unit newly recruits 100-250 people, assistance of 10% of expenses (cap at Rs 35 lakh), 251-500 employees (20% of expenses cap at Rs 1.2 cr), 501-700 (30% of expenses cap at Rs 3 crore), 701-999 (50% of expenses at Rs 7 cr), and above 1,000 employees (customised package on case-to-case basis).

Companies that are relocating talent from Bengaluru to Beyond Bengaluru regions will receive 50% of one-time relocation expenses up to Rs 50,000 per employee. This also includes relocations from anywhere outside the state to Beyond Bengaluru. Besides, other incentives include power tariff concession, electricity duty and property tax reimbursement.

The policy also mentioned that mega projects (investment above Rs 300 crore) will be considered for customised incentive packages.