Tamil Nadu unlinks semiconductor incentives from Centre’s approval, offers hiring and local sourcing benefits

Tamil Nadu has introduced a new semiconductor incentive scheme that allows the State to support projects independently of their selection under the Centre’s semiconductor programme, while encouraging local employment, domestic sourcing and research and development, BusinessLine reported.

The Tamil Nadu Semiconductor Ecosystem Scheme 2026, released on Thursday, offers two incentive tracks. The first covers projects approved under the Centre’s Semicon 2.0 programme, with State assistance over and above Central support. The second is open to projects that have not applied for or have not been selected for Central incentives.

Under Track 1, major projects can receive State capital subsidies of up to 25 per cent. Track 2 offers fixed capital subsidies ranging from 15 per cent to 25 per cent of eligible fixed assets, along with turnover-based incentives for specified categories.
Incentives linked to local employment

The scheme links financial support to employment generation within the State. Projects under both tracks must ensure that at least 50 per cent of their direct workforce comprises Tamil Nadu residents. At least 60 per cent of high-value jobs, defined as positions with basic wages exceeding ₹25,000 a month, must also be filled by State residents.

Eligible projects can receive a payroll subsidy equivalent to 10 per cent of basic wages for qualifying local employees for 10 years.

The scheme also provides a training incentive of ₹10,000 per person per month for 12 months. This benefit is extended to 24 months for women, transgender employees, persons with benchmark disabilities and employees from Scheduled Caste and Scheduled Tribe communities.

Broader support for semiconductor ecosystem

The scheme extends beyond semiconductor fabrication plants, outsourced semiconductor assembly and testing (OSAT) facilities and packaging units. It also covers semiconductor equipment, materials, chemicals, gases, testing facilities and research and development infrastructure.

Companies achieving at least 20 per cent localisation in their cost of goods sold can qualify for an additional capital subsidy, encouraging greater domestic sourcing and the development of local supply chains.

Other benefits include land and stamp duty concessions, a five-year electricity tax exemption, interest subvention, and subsidies for product testing, prototyping and intellectual property registration, subject to the scheme's conditions.

Companies must submit eligible proposals to Guidance Tamil Nadu on or before September 30, 2027.

The scheme aims to strengthen Tamil Nadu’s semiconductor ecosystem by attracting investments beyond projects selected under the Centre’s programme while building local manufacturing capabilities, skilled employment and research capacity.