MSME capital (investment promotion) subsidy
| Enterprise | Zone 1 | Zone 2 | Zone 3 (Bengaluru Rural only) |
|---|---|---|---|
| Micro (P&M under ₹1 cr) | 30% of fixed assets, up to ₹30 lakh (35%, ₹35 lakh special category) | 25%, up to ₹25 lakh (30%, ₹30 lakh) | 10%, up to ₹10 lakh (15%, ₹15 lakh) |
| Small (₹1–10 cr) | 25%, up to ₹2 crore (30%, ₹2.25 crore) | 20%, up to ₹1.5 crore (25%, ₹1.75 crore) | 10%, up to ₹50 lakh (15%, ₹75 lakh) |
| Medium (₹10–50 cr) | 25%, up to ₹10 crore, or turnover-linked incentive | 20%, up to ₹8 crore, or PLI | 10%, up to ₹4 crore, or PLI |
Special category includes SC/ST, women, minorities, persons with disabilities and ex-servicemen. Most-backward and more-backward taluks get a further 5% or 3%. Micro and small subsidies are paid in two annual instalments. Expansion needs at least 25% addition to fixed assets.
Other incentives
- Stamp duty: 100% in Zones 1 and 2 (currently given as reimbursement until the Stamp Act is amended)
- Land conversion fee: 100% reimbursed in Zones 1 and 2 after production
- Electricity tax exemption: 100% for 6–8 years in Zones 1 and 2, once the Energy Department notifies it
- Power subsidy: ₹1 per unit for 3 years for micro and small units in Zones 1 and 2 (₹2 for 5 years for SC/ST units)
- Quality and export certification: 50% of cost, up to ₹5 lakh each
- Sustainability equipment (ETP, ZLD, pollution control): 50%, up to ₹50 lakh each
- SC/ST entrepreneurs: 75% subsidy on land or shed and interest-free seed capital support
Conditions that trip up claims
- Claim filed more than 12 months after commercial production — the MSME loses eligibility
- Production not started within 3 years of single-window approval
- Ineligible items claimed as fixed assets (guest houses, ACs, decoration, old buildings, cash payments over ₹2 lakh)
- Local employment norms missed (70% Kannadigas overall, 100% of Group D) or six-monthly declarations not filed
How we file it
- Single-window approvalDLSWCC up to ₹15 crore or SLSWCC up to ₹500 crore, through Karnataka Udyog Mitra.
- Commercial productionWithin 3 years of approval, with the first sale invoice as proof.
- Subsidy applicationTo the District Industries Centre within 12 months, with CA and engineer certificates.
- Sanction and complianceInspection, District Level Committee sanction, agreement, then six-monthly employment declarations and a 5-year asset lock-in.
Documents required
- Common Application Form and annexures
- Udyam and constitution documents
- Single-window approval / GO
- GST registration and project report
- Land title or registered lease (10+ years)
- CA certificate of fixed assets; engineer certificate for civil works
- Term loan sanction and disbursement
- First sales invoice, power sanction, local employment declaration
Sources: Karnataka Operative Guidelines 2025-30 (Invest Karnataka) · ICAI – Karnataka State MSME Policy 2026 · Grant Thornton – Karnataka Industrial Policy 2025-30
Frequently asked questions
Which policy applies to new MSME investment in Karnataka?
The Karnataka Industrial Policy 2025-30, notified by GO CI 123 SPI 2024 dated 8 February 2025 and valid for five years. Its operative guidelines were approved on 10 April 2026.
How much capital subsidy can a micro enterprise get?
30% of fixed assets up to ₹30 lakh in Zone 1 (35% up to ₹35 lakh for special category), 25% in Zone 2 and 10% in Zone 3 (Bengaluru Rural only), with extra support in the most backward taluks.
What is the deadline to apply?
MSMEs must apply within one year of starting commercial production, and production must start within three years of single-window approval.
Does a unit in Bengaluru city get a subsidy?
Zone 3 capital subsidy is limited to Bengaluru Rural district; other Zone 3 taluks in the Bengaluru Urban area get no base capital subsidy, though some other incentives may apply.