The Karnataka MSME subsidy at a glance
The Department of Industries and Commerce, Government of Karnataka, publishes operative guidelines for the package of incentives under the Industrial Policy 2025-30. They were approved by a government letter dated 10-Apr-2026 (Karnataka Industrial Policy 2025-30 guidelines). For micro and small enterprises, the main incentive is a capital subsidy on the value of fixed assets (VFA) (Karnataka Industrial Policy 2025-30 guidelines).
Karnataka had 60,26,589 MSMEs on the Ministry of MSME's Udyam dashboard as of 03-Oct-2026, including 29,18,018 micro enterprises on Udyam (Ministry of MSME Udyam dashboard).
How Karnataka sorts MSMEs for its incentives
For working out incentives, the guidelines use investment in plant and machinery or equipment only (Karnataka Industrial Policy 2025-30 guidelines):
| Category | Investment in plant and machinery or equipment | Source |
|---|---|---|
| Micro | Below ₹1,00,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
| Small | ₹1,00,00,000 to ₹10,00,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
| Medium | ₹10,00,00,000 to ₹50,00,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
Taluks are grouped into zones by how industrially backward they are, and the subsidy is highest in Zone 1 (Karnataka Industrial Policy 2025-30 guidelines). The guidelines list the taluks in each zone.
Capital subsidy for micro enterprises
| Entrepreneur | Zone 1 | Zone 2 | Zone 3 | Source |
|---|---|---|---|---|
| General | 30% of VFA, up to ₹30,00,000 | 25% of VFA, up to ₹25,00,000 | 10% of VFA, up to ₹10,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
| Special: SC, ST, women, minorities, persons with disabilities and ex-servicemen | 35% of VFA, up to ₹35,00,000 | 30% of VFA, up to ₹30,00,000 | 15% of VFA, up to ₹15,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
Capital subsidy for small enterprises
| Entrepreneur | Zone 1 | Zone 2 | Zone 3 | Source |
|---|---|---|---|---|
| General | 25% of VFA, up to ₹2,00,00,000 | 20% of VFA, up to ₹1,50,00,000 | 10% of VFA, up to ₹50,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
| Special | 30% of VFA, up to ₹2,25,00,000 | 25% of VFA, up to ₹1,75,00,000 | 15% of VFA, up to ₹75,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
Extra subsidy in backward taluks
Taluks graded in the Dr. D.M. Nanjundappa Committee report get more (Karnataka Industrial Policy 2025-30 guidelines):
| Unit | Most backward taluks | More backward taluks | Source |
|---|---|---|---|
| Micro | Extra 5% of VFA, up to ₹5,00,000 | Extra 3% of VFA, up to ₹3,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
| Small | Extra 5% of VFA, up to ₹10,00,000 | Extra 3% of VFA, up to ₹5,00,000 | Karnataka Industrial Policy 2025-30 guidelines |
Medium enterprises
A medium enterprise chooses between a capital subsidy and a production-linked incentive, and the choice stays fixed for the approved investment. The capital subsidy is 25%, 20% or 10% of VFA by zone, up to ₹10,00,00,000, ₹8,00,00,000 or ₹4,00,00,000, paid in four annual instalments (Karnataka Industrial Policy 2025-30 guidelines).
Time limits and payment
- Start production within three years of approval by the district or state single window committee (Karnataka Industrial Policy 2025-30 guidelines).
- Apply within one year of starting commercial production (Karnataka Industrial Policy 2025-30 guidelines).
- Paid in two annual instalments for micro and small enterprises, after commercial production starts (Karnataka Industrial Policy 2025-30 guidelines).
MSME applications made online go to the Joint Director of the District Industries Centre concerned. A financial institution, bank or chartered accountant certifies the investment in a format the department prescribes (Karnataka Industrial Policy 2025-30 guidelines).
Your next step
The subsidy follows the investment, so the funding plan comes first. Run the free loan readiness check to see how a lender may read your file, and read the project report guide. Other states are on the state schemes hub.
Frequently asked questions
30%, 25% or 10% of the value of fixed assets by zone for general entrepreneurs, and 35%, 30% or 15% for special category entrepreneurs, up to ₹35,00,000 (Karnataka Industrial Policy 2025-30 guidelines).
10% to 30% of the value of fixed assets by zone and category, up to ₹2,25,00,000 (Karnataka Industrial Policy 2025-30 guidelines).
SC, ST, women, minorities, persons with disabilities and ex-servicemen (Karnataka Industrial Policy 2025-30 guidelines).
Within one year of starting commercial production (Karnataka Industrial Policy 2025-30 guidelines).
In two annual instalments for micro and small enterprises, after commercial production starts (Karnataka Industrial Policy 2025-30 guidelines).