Karnataka IT, ITES Innovation Incentive Policy 2020 (momentous step towards decentralization)

 05 September 2020   |    Sunayana Basu Mallik

Possibly drawing from the idea of decentralization and excessive emphasis on developing major metropolitan cities the attempt was to encourage companies and business organizations to move their bases or start their business from locations outside the city of Bangalore.  There are three major categorization (Bangalore and its hinterland, Mysore-Mangalore corridor) and other locations).

Government to encourage such companies to employ skilled personnel will extend subsidies which will then be set off against land cost in the above geographic locations.


The Karnataka IT, ITES Innovation Incentive Policy 2020 - Notable Aspects

The Karnataka IT, ITES Innovation Incentive Policy 2020  (I 4 Policy) introduced by Government of Karnataka on 2nd September, 2020 has a single window clearance for ITES, start up companies and companies into gaming and animation. The policy interesting introducing land allotment for such companies at concessional rate provided such companies generate a certain number of jobs.


Who is eligible to avail its advantages ?

  • Companies having no presence or facility in Karnataka
  • Listed Companies with NASDAQ, London Stock Exchange, Tokyo Stock Exchange or National Stock Exchang OR
  • Companies present in Fortune 500 US list or 1000 Global list for minimum of three (3) years OR
  • Networth of the company must be 250 crore

The policy stipulates that with every 1000 jobs being created 1 acre of land will be allotted in Karnataka. The actual subsidy is linked to the jobs being created by such organization/company. A subsidy of Rs.60,000/- can be availed by companies for every job being created by such companies.

The subsidy can be set off against land cost. The company will get a total time period of three years extendable up to to five years on the request of the company to meet the company’s employment commitment.

Hear the full Article

Start up launch pad and Co Working ecosystem in smaller cities

In India one of expensive fixed cost is cost of commercial rent in a city. The Government to enable start ups to navigate the problem has introduced. It purports to give cash support to developers of coworking spaces with a minimum built up facility of 15000 square feet. 

Startups will get a concessional rate of Rs.5 to Rs.15 per sq ft to work from Plug and Play office and coworking spaces depending on the location within Karnataka. Such spaces can be government owned, leased or leased by private entities. Start ups once they reach a revenue of Rs.10 crores in other location, Rs.15 crore in Mysore-Mangalore corridor or Rs.25 crore in Bengaluru has to vacate the plug and play office. Alternatively if start ups employ more than 25 technically qualified personnel in other locations, 35 technically qualified personnel in Mysore-Mangalore corridor or 50 technically qualified personnel in Bangalore they have to move out or vacate such spaces availed at concessional rate.

Exemptions from rigorous compliance 

IT, ITES, computer graphics, gaming Companies, BPO, KPO and other knowledge based companies are exempted from operation of Karnataka Industrial Employment Standing Order Rules 1946 with appropriate provisions on women rights at workplace and prevention of sexual harassment at workplace will be implemented. 

Reimbursement from government 
Government will reimburse the companies share of Provident Fund to an extend of Rs.2000/ per employee for a period of two years subject to such employee being in continuous employment.  The prevailing deduction on account of PF is 12% out of which only 6% is deducted from employee's salary. Thus, if a Company employs 10 personnel paying them a salary of fifty thousand (50,000/- INR) the Government in addition to paying 6% of its own contribution for the employee, the Government will reimburse Rs.2000/- from the company's share of PF contribution. The Company will not have to pay its own contribution of Rs.3000/- and the Government will reimburse Rs.2000/- per employee.

Resonance of decentralization 

First time in several years after independence, there is policy to encourage companies to move out of metropolitan cities (already saturated) to smaller cities (tier II and tier III). As a reckoning to the key industries development that took place during 1970s and 1980s wherein several smaller cities were known nationally and globally due to its large industries and good townships that developed around such industrial establishments, now it is the time for IT and ITES sector.  

Earlier technically skilled personnel would travel from districts and smaller cities to work in Bangalore for larger companies. However now, the companies may consider moving its base to smaller cities which will introduce a massive boost to lifestyle offering at a comparatively tranquil city. The landscape of developing urban living will change once the policy is implemented. In recent history or past history several smaller cities were extremely self reliant with all the essential infrastructure, education, health care and other facilities being available in the same city itself. This policy will stimulate and re-emphasize the priority to make smaller cities entirely self reliant and now to support a growing range of IT and innovation driven companies. 

Start Up and Regular IT Companies

However, if a company is not a start up then the eligibility criterion to avail the benefit of the scheme is stiff.  Quite a few companies will struggle to meet the criterion to be eligible to avail the benefits. 

For a start up company the present scheme is in alignment with its active virtual adoption and meetings and considerable corporate communications being held virtually. It is a tremendous booster for them to work out of smaller cities and still make their businesses niche, having deep impact on innovation and notable in terms of productivity.

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