Karnataka’s IT-BT Policy 2025–30 offers rent, tax & R&D incentives to shift startups from Bengaluru to Tier2/3 hubs, targeting 30k firms

Karnataka has unveiled a bold initiative to decentralise its technology ecosystem, aiming to shift the state’s startup growth beyond Bengaluru. The new IT-BT Policy (2025–2030) introduces a suite of financial incentives designed to encourage companies to establish operations in Tier‑2 and Tier‑3 cities such as Mysuru, Mangaluru, Hubballi‑Dharwad, Shivamogga and Kalaburagi.

The government’s strategy is clear: reduce the pressure on Bengaluru’s overcrowded and high‑cost environment while fostering innovation hubs across the state. The policy sets an ambitious target of nurturing 30,000 startups by 2030, with at least 5,000 emerging from smaller cities. To achieve this, the state has earmarked nearly ₹960 crore over the next five years.

Among the incentives, startups relocating outside Bengaluru will benefit from a 50% reimbursement on office rent, capped at ₹2 crore, and a 30% property tax rebate for three years. Firms can also claim up to ₹50,000 per employee under a “talent relocation reimbursement” scheme, easing the cost of moving teams to new locations.

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Additional measures include a full waiver on electricity duty for five years and a 25% rebate on telephone and internet bills, up to ₹12 lakh. For companies investing in innovation, the government promises 40% reimbursement on R&D expenditure, capped at ₹50 crore. Special capital incentives are reserved for cutting‑edge work in artificial intelligence, machine learning, quantum computing and blockchain.

The policy also envisions the creation of sector‑specific clusters and startup zones, ensuring that infrastructure and support systems are in place to sustain growth outside the capital. Applications for these benefits are expected to open by mid‑December 2025, with each incentive category limited to 100 beneficiaries. This makes the rollout a competitive race for founders eager to secure early advantages.

By decentralising opportunities, Karnataka hopes to balance its tech economy, reduce urban stress in Bengaluru, and position its Tier‑2 and Tier‑3 cities as vibrant innovation destinations.

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