Karnataka’s new IT policy offers sops for co-working spaces, tech firms away from Bengaluru


Bengaluru: Karnataka unveiled its new IT and IT-enabled services ( ITeS) policy on Thursday, offering small technology product and service businesses plenty of incentives to set up shop away from the capital of Bengaluru.

The policy focuses on improving digital infrastructure in Tier-II and Tier-III cities and allowing remote and distributed labour, taking the cue from the way technology companies responded to the Covid-19 pandemic and the resulting national lockdowns.

Bengaluru is the fourth-largest technology cluster in the world. Four-fifths of global IT businesses operate in India and R&D centres based in Karnataka.

“We want to add about 60 lakh direct and indirect jobs by encouraging technology investments in tier II and tier III cities,” deputy chief minister CN Ashwath Narayan told ET.

The policy seeks to promote a culture of innovation in these regions.

The strategy offers cash support of up to Rs 2 crore for co-working space developers with a minimum built-up area of 15,000 square feet.

Those setting up tech companies at the plug and play facilities will earn a rental and lease reimbursement of Rs 10 per square foot or Rs 3 lakh for a year.

“We are aligning our goals with that of the Centre to create a $1 trillion digital economy out of India. In Karnataka, we have targeted a $300 billion digital economy over the next five years,” Narayan, who holds the IT/BT portfolio, said.

During the previous five-year policy period starting in 2014, Karnataka received Rs 6728 in investments, adding over 173,000 new jobs.

The Cabinet has planned to draft a new cybersecurity policy to adopt the necessary protections for data protection.

Investments under the IT policy will be subject to a stamp duty exemption of between 75% and 100% based on where the project is being proposed, and investors will also be able to pay concessional power tariffs.

The Government will provide support for research and development initiatives up to Rs 1 crore and will reimburse costs for quality certification and patents.


The Cabinet also approved a special incentive scheme for the electronics system design and manufacturing (ESDM) sector.

Investments away from the urban and rural districts of Bengaluru will earn a capital investment subsidy of 25 per cent on land and 20 per cent on plant and machinery. They will also receive a 100 per cent cash-back on stamp duty, registration fees and land conversion fees.

Investors will also receive 1% of annual turnover as a production-linked incentive over five years, including for investments to expand existing units.