Investment Promotion Subsidy for Micro & Small Enterprises

The Investment Promotion Subsidy under the Karnataka Industrial Policy 2020‑25 is a state government incentive aimed at new manufacturing enterprises located in Karnataka to encourage fixed-capital investment and turnover growth. The subsidy is offered by the Karnataka Udyog Mitra / Department of Industries and Commerce as part of its industrial policy framework.

Key Features
Financial Assistance
Eligibility Criteria
Documents Required
Application Process for the Scheme

Key Features

Zone-wise incentive structure: The State is divided into zones for determining subsidy rates. For example, micro-enterprises in Zone 1 may get higher subsidy than those in Zone 3.
Subsidy linked to value of fixed assets and/or turnover: The subsidy may be calculated as a percentage of the value of fixed assets you invest and/or as a percentage of annual turnover for a limited period. Eg: micro units may get up to 30 % of VFA in Zone 1.
Enhanced rates for special-category entrepreneurs: Entrepreneurs belonging to women, SC/ST, minorities, ex-service persons, persons with disabilities may get higher subsidy percentages.
Applicable across new micro & small enterprises located in specified zones: The scheme is intended for newly setting up micro & small enterprises in Karnataka and located in the defined zones of the state.
Defined caps, duration & conditions for claiming subsidy: There are maximum limits on subsidy (for example maximum % of VFA or maximum years for turnover-linked subsidy), and enterprises must meet commencement of commercial production timelines, employment norms etc.

Financial Assistance

Component	Assistance Provided	Detailed Explanation & Example
Investment Promotion Subsidy based on Value of Fixed Assets	Subsidy up to a specified % of VFA	Example: Suppose you set up a micro enterprise in Zone 2 with fixed assets value ₹ 1 crore, and subsidy rate for general category is 25% of VFA (cap say ₹ 20 lakh) – you become eligible for subsidy of max ₹ 20 lakh (since 25% of ₹1 cr = ₹25 lakh, but cap is ₹20 lakh) as per the terms.
Turnover‐linked subsidy for initial years	Micro & small units eligible for subsidy up to say 10% of annual turnover for up to 5 years	Example: If your micro unit in Zone 2 has annual turnover ₹ 2 crore, you may claim up to ₹ 20 lakh (10% of ₹2 crore) in a year, for up to 5 years or until you reach the cap.
Enhanced subsidy for special category entrepreneurs	Higher % of VFA for SC/ST, women, minorities etc	Example: If the general rate is 20% of VFA, for SC/ST/Women it may be 25% of VFA in the same zone.

Eligibility Criteria

Who Can Apply:

Enterprises classified as Micro or Small as defined under the MSME norms and notified investment criteria in Karnataka.
Manufacturing enterprises in Karnataka which commence commercial production during the policy validity period (for 2020-25: 13 August 2020 to 12 August 2025) unless extended.
Units located in designated zones as per state industrial policy categorisation.
Units must satisfy other conditions such as employment of Kannadigas, etc.

Who Cannot Apply:

Enterprises which started commercial production before the policy notification date or outside the policy period .
Enterprises outside Karnataka or those not manufacturing units .
Units classified as “Medium” or above , unless the policy explicitly includes them.
Units engaged in ineligible activities as per policy exclusion.
Units not registering with required registrations (e.g., Udyam / DIC) or failing local content/employment norms.

Documents Required

Udyam registration certificate.
Copy of project/plant setup cost and fixed capital investment details.
Proof of commencement of commercial production .
Audited accounts / turnover statements for eligible years .
Certificate of zone classification (Zone 1/2/3) as per policy.
Employment certificate or details of Kannadiga employment .
Bank statement / details of investment made and asset acquisition.
Any special category certificate (SC/ST, women entrepreneur, minority, ex-services, PWD) if claiming special rate.

Application Process for the Scheme

Option 1: Apply with Bullit

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Option 2: Via Government Single Window / Udyog Mitra

Visit the Karnataka Single Window Clearance Portal or the Karnataka Udyog Mitra portal under the Department of Industries & Commerce.
Register your enterprise with Udyam and other required registrations.
Apply for the incentive under the investment promotion subsidy category, selecting zone, enterprise size (micro/small) and upload project details, fixed capital investment plan, employment plan etc.
After commercial production begins and required approvals are obtained, submit claim for subsidy along with audited accounts and turnover proof as per policy.
Subsidy amount is verified by the concerned nodal office (DIC / Single Window) and disbursed accordingly.

Option 3: Through District Industries Centre Facilitation

Approach your local District Industries Centre in your district of Karnataka.
Seek assistance with project registration, zone classification clarification, incentive eligibility, and document compilation.
DIC helps coordinate with the single window / Udyog Mitra portal and monitors your subsidy claim process.