Investment Promotion Subsidy on Fixed Capital

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Status: Active

Classification: Public Sector Scheme

Release Date(s):
25th February 2023
25th November 2021

Offering: Subsidy/Incentive

Entity Type: State Government

Reading Time: 7 Mins

Ticket Size: ₹ 10 Lakhs - ₹ 1.05 Crore

Entity Name: Government of Karnataka

#Views: 58

Disclaimer….before you read ahead!
The information contained herein is of a general nature and for information purposes only, with the intent of raising awareness around various resources, schemes etc. available for women entrepreneurs in India. It is not intended to address the circumstances of any particular individual or entity. It does not purport to be all-inclusive or necessarily contain all the information that may be relevant for the reader, and may be subject to updation, revision or amendment. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to remain accurate in the future. The reader, therefore, is required to exercise their discretion; and not act on such information without appropriate professional advice after a thorough examination of the particular situation.

Furthermore, we are not a lender and are not authorized by the Reserve Bank of India to act as one. By disseminating the information contained herein, we are not soliciting any borrower or customers for the company or organization mentioned herein nor do we intend to syndicate any capital for the reader of this email.


About this scheme…

Investment Promotion Subsidy on Fixed Capital is one of the fiscal incentives provided by State Government of Karnataka, as a part of their 5-year Industrial Policy, to strengthen and promote Micro, Small and Medium Enterprises (MSMEs) with the objective of achieving inclusive industrial growth and promoting employment generation in the state.

This scheme is currently active under Karnataka Government’s New Industrial Policy 2020-25 and for the period 2020-25. You may read more about the policy here.


How is it being implemented?
Under Karnataka State Government’s Investment Promotion Subsidy on Fixed Capital Scheme, direct subsidies are given to MSMEs operating in manufacturing sector or specified categories in services sector for new and additional investments made in eligible fixed assets during the policy period for establishment of new enterprise, or for expansion or diversification or modernization.

Furthermore, under this scheme, additional subsidy is given to MSMEs run by women entrepreneurs, SC/ST, minorities, physically challenged and ex-Servicemen entrepreneurs.


What’s on offer?

I. Product

  • Subsidy or concessions towards new investment made in eligible fixed assets
    • Value of Eligible Fixed Assets (VFA) shall mean the total investment made on land, building and plant and machinery including R&D equipment and such other productive assets like tools, jigs & fixtures, dyes, utilities like boilers, compressors, DG Sets, cranes, material handling equipment and such other equipment directly related to production purposes
  • Quantum
    • For women run Micro Enterprises located in
      • Zone 1 – 35% of VFA upto ₹30 Lakhs
      • Zone 2 – 30% of VFA upto ₹25 Lakhs
      • Zone 3 – 10% of VFA upto ₹10 Lakhs
    • For women run Small Enterprises located in
      • Zone 1 – 30% of VFA upto ₹1.05 Crores
      • Zone 2 – 25% of VFA upto ₹95 Lakhs
      • Zone 3 – 10% of VFA upto ₹25 Lakhs
    • For women run Medium Enterprises located in
      • Zone 1 – 40% of VFA
      • Zone 2 – 35% of VFA
      • Zone 3 – Nil

To identify which zonal classification would your business fall under, please refer to Annexure 5 of the said Industrial Policy 2020-25 (Page 97 onwards in the PDF document)

  • Disbursement schedule for such subsidies
    • For Micro & Small Enterprises, annual disbursement to an extent of 10% of turnover in each financial year; spread over five financial years from the date of commencement of commercial production or when VFA limits (as prescribed above) are reached, whichever is earlier and no carried forward is permitted
    • For Medium Enterprises, annual disbursement to an extent of 2.5% of turnover in each financial year; spread over – six financial years in case of Zone 1 and five financial years in case of Zone 2 – from the date of commencement of commercial production or when VFA limits (as prescribed above) are reached, whichever is earlier and no carried forward is permitted
      • Furthermore, such turnover percentage for Medium Enterprises is subject to meeting the Minimum Direct Employment criteria of employing 20 people for first ₹10 Crores of investment in VFA and employing 7 people for every ₹10 Crores of additional investment in VFA proportionately
      • Medium Enterprises requiring lower employment, or which are unable to provide employment proportionate to investment as stipulated will have a lower turnover percentage in proportion to the total employment provided

II. Purpose:

  • New investments in eligible fixed assets

III. Borrower Type:

  • Sole Proprietorship, Partnership Firm, Limited Liability Partnership (LLP), Private Limited Company, Public Limited Company, Co-operative Society

IV. Turnaround Time

  • It takes about 25-30 working days for the sanction order to come through once the application is submitted online

Interested? Read ahead to check your eligibility….

I. Is yours a Micro, Small or Medium Enterprise per the MSMED Act 2006?

  • Micro Enterprise: Investment in plant & machinery or equipment does not exceed ₹1 Crores and turnover does not exceed ₹5 Crores
  • Small Enterprise: Investment in plant & machinery or equipment does not exceed ₹10 Crores and turnover does not exceed ₹50 Crores
  • Medium Enterprise: Investment in plant & machinery or equipment does not exceed ₹50 Crores and turnover does not exceed ₹250 Crores
  • Find more information here

II. Is your Enterprise’s location in Karnataka classified as Zone 1, Zone 2 or Zone 3?

To identify which zonal classification would your business fall under, please refer to Annexure 5 of the said Industrial Policy 2020-25 (Page 97 onwards in the PDF)

III. Is your enterprise a manufacturing enterprise which does NOT fall into list of ineligible industrial activities as laid out in Annexure 4 of said Industrial Policy 2020-2025 (Page 96 in the PDF document)


Does your enterprise fall into list of focus sectors of Industrial Policy 2020-25 namely, Automobiles & Auto Components; Pharmaceuticals & Medical Devices; Engineering & Machine Tools; Knowledge-Based Industries; Cement; Steel; Sugar; Logistics; Renewable Energy; Aerospace & Defense; Electric Vehicles; Healthcare & Wellness, Higher Education and Bio-Fuels?


Is your enterprise an eligible service enterprise to avail the scheme as laid out in Annexure 3 of said Industrial Policy 2020-2025 (Page 95 in the PDF document)

IV. Are you looking for a subsidy for new investments made in eligible fixed assets either for establishment of new enterprise, or for expansion or diversification or modernization?

V. Are you planning to apply for this subsidy scheme within one year from the date of commencement of commercial production from such new investments?

If your answers to the questions above are an emphatic YES, you are all set to avail Investment Promotion Subsidy on Fixed Capital by Karnataka State Government!

You may also go through the additional terms & conditions for availing this scheme in Annexure 2 of the said Industrial Policy 2020-25 (Page 91-94 in the PDF document)


So…how big is this scheme and what has been done so far?

I. As of November 28, 2022:

  • 268 applications were received for sanction by District Industries Center under State Investment Subsidy Scheme, of which, 244 were processed further
  • 27 applications were received for sanction by Industries & Commerce Department under Investment Promotion Subsidy on Fixed Capital Scheme, of which, 12 were processed further


So, now, how should you go about it?

I. For submitting application,


II. For information on loan application (Common Application Form and Form 3 – Application for State Investment Subsidy), and indicative list of documentation required in English please click here (Refer to Pages 2-4, 7-8 of the PDF document)

III. For any queries, please contact District Industries Centre in your respective Districts. Please find their address and other contact details here (Page 121 onwards of the Industrial Policy 2020-25)


Go on then…and do spread the word!



  1. About Karnataka Government’s Industrial Policy 2020-25
  2. About Investment Promotion Subsidy on Fixed Capital Scheme – Table 9.1.1 on Page 72 of Policy/ Page 74 of PDF document
  3. Dashboard on the Scheme – Look at points 7 & 19
  4. About Application Process for the Scheme – Page 1-7
  5. Common Application Form, Form 2 and Instructions
  6. About the process of availing the Scheme

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