From Rs 50K employee reimbursement to Rs 10 crore for IT parks: How Karnataka is luring IT firms to Beyond Bengaluru clusters

Karnataka Chief Minister Siddaramaiah. (File Photo)

Karnataka has proposed several incentive packages to drive IT companies into Tier II and Tier III cities, offering firms up to Rs 50,000 for every local employee hired and Rs 10 crore for setting up IT or ITeS parks, according to the IT Policy 2025-2030.

The measures are part of a wider strategy to ease pressure on Bengaluru’s strained infrastructure and seed new technology hubs across the state.

Additionally, the state has also proposed cost-reduction incentives to shift technology investments beyond Bengaluru, offering companies reimbursements on rent, property tax, electricity duty, and telecom expenses if they set up operations in Tier II and Tier III cities.

The proposals are part of a Rs 445 crore, five-year plan.

Karnataka’s hiring support to build talent beyond Bengaluru

To encourage companies to recruit locally in emerging cities, the state is offering Rs 50,000 per local hire, capped at Rs 10 lakh per unit, as part of its talent relocation and recruitment support.

Companies relocating talent from Bengaluru to other districts will also receive 50 percent reimbursement of relocation expenses, with support extended for up to 50 employees per unit.

These hiring incentives are targeted exclusively at Beyond Bengaluru districts and are designed to reduce onboarding costs for firms entering less mature talent markets such as Mysuru, Mangaluru, Hubballi-Dharwad, Kalaburagi, Belagavi, Shivamogga, and Davanagere.

Up to Rs 10 crore support for IT and ITeS parks

The policy also proposes substantial capital support for developers setting up IT parks.

Developers establishing IT or ITeS parks outside Bengaluru will be eligible for 25 percent reimbursement of eligible capital expenditure, capped at Rs 10 crore.

Bengaluru-based IT parks will receive 20 percent reimbursement, capped at Rs 7.5 crore.

The government has capped this incentive at 10 parks, ensuring targeted support for early anchor infrastructure in new tech clusters.

Most IT firms remain concentrated in Bengaluru, generating significant revenue but overwhelming the city's infrastructure.

By offering a combination of direct hiring subsidies and large-scale capital support for IT parks, the state aims to redistribute technology growth and attract companies reluctant to expand due to real-estate costs and talent shortages.

IT talent return programme

Moreover, Karnataka’s newly approved IT Policy positions the state as a landing pad for returning professionals through its IT talent return programme, amid the ongoing H-1B visa disruptions.

The initiative will introduce a digital portal that matches mid-career engineers and leaders coming back from overseas with Karnataka-based companies seeking R&D, leadership, and mentoring experience.

The state’s ambition is to lead in deep-tech areas, including AI, Blockchain, Quantum Computing, and advanced Cybersecurity.

R&D cap raised from Rs 1 cr to Rs 50 cr

The Rs 445 crore policy outlay includes Rs 345 crore for fiscal incentives and Rs 100 crore for interventions.

In this, the R&D programme alone accounts for Rs 125 crore in allocations. Under the proposal, companies in Bengaluru and beyond Bengaluru can claim reimbursements on qualified R&D activities up to the Rs 50 crore cap.

The government has advised scaling the number of beneficiaries or unit costs based on fiscal prudence, but the incentive represents a significant jump from the earlier limit of Rs 1 crore per company under the previous IT policy (2020-25).

The policy also aligns with the state’s strategic goal of raising IT’s contribution to Gross State Value Added from 26 percent to 36 percent over the next five years.

Also, read: Karnataka’s first skill policy proposes AI and digital tools for training and career guidance