Bengaluru's IT Reign Challenged! Karnataka Unveils Secret Plan to Ignite Tech Hubs in Tier 2 Cities - Big Savings Await!

Author

Simar Singh | Whalesbook News Team

Detailed Coverage:

Karnataka has introduced its draft IT Policy for 2025-30, designed to decentralize technology investments beyond its capital, Bengaluru. The policy proposes substantial cost-reduction incentives for Information Technology (IT) and IT-enabled services (ITES) companies willing to establish operations in Tier II and Tier III cities such as Mysuru, Mangaluru, and Hubballi-Dharwad.

Key incentives include a 50 percent reimbursement on rent for up to ₹2 crore, a 30 percent property tax reimbursement for three years, and a complete 100 percent waiver on electricity duty for five years. Additionally, companies can claim 25 percent reimbursement on telecom and internet expenses, capped at ₹12 lakh, a unique benefit aimed at supporting smaller and mid-sized firms. The total policy outlay over five years is ₹445 crore, with ₹345 crore allocated for fiscal incentives.

This initiative aims to address the severe infrastructure challenges faced by Bengaluru due to high demand and to leverage talent available in other cities. It marks a significant departure from previous IT policies that were heavily focused on Bengaluru. The policy also offers hiring support, internship reimbursements, talent relocation support, and R&D incentives across the state. Proposals will be submitted to the state cabinet for approval.

Impact This policy is expected to foster economic growth in Karnataka's smaller cities, create new job opportunities, and diversify the state's IT landscape. It could also lead to increased investment in these emerging tech hubs, potentially benefiting ancillary businesses and infrastructure development. Rating: 7/10

Difficult Terms: * IT (Information Technology): The use of computers, software, and the internet to store, retrieve, transmit, and manipulate data. * IT-enabled services (ITES): Services that deliver IT services or manage IT infrastructure, often including business process outsourcing (BPO) and knowledge process outsourcing (KPO). * Tier II cities: Cities that are generally smaller than metropolitan (Tier I) cities but are significant economic and administrative centers. * Tier III cities: Smaller cities or towns that are developing economically and industrially. * Fiscal incentives: Financial support or benefits provided by the government to encourage certain economic activities. * Capital expenditure: Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, and equipment. * Operating expenditure: The ongoing costs a company incurs to run its business, such as rent, salaries, and utilities. * Rent reimbursement: A refund provided by the government for a portion of the rent paid by a company for its office space. * Property tax: A tax levied on the value of property owned by individuals or businesses. * Electricity duty: A tax imposed on the consumption of electricity. * Telecom expenses: Costs associated with telecommunication services, such as internet and phone services. * GCC (Global Capability Centers): Centers established by global companies in India to provide specialized services like R&D, IT, and business process management. * Talent density: The concentration of skilled professionals in a particular geographic area. * Real-estate risk: The potential for loss or difficulty associated with investing in or developing property. * Anchor units: The first few significant companies that establish operations in a new development zone, attracting further investment. * R&D (Research and Development): Activities undertaken by companies to innovate and introduce new products and services, and to improve existing ones.