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microchip integrated on motherboard | Photo Credit: crstrbrt

Tamil Nadu is delinking its semiconductor incentives from the approval under the Centre’s semiconductor programme, and has floated a new scheme that allows the State to offer support to investors even if their projects have not been selected under Union Govt’s Semicon 2.0.

The scheme also takes a holistic approach to building the semicon ecosystem, going beyond capital subsidy and offers incentives for employing locals, undertaking more training of human resources, rewards localisation and also encourages R&D and IP creation.

The new scheme also extends incentives to semiconductor equipment, materials, chemicals, gases, testing and R&D infrastructure, in addition to setting up fabs, OSAT and packaging units.

Under the Tamil Nadu Semiconductor Ecosystem Scheme 2026 released on Thursday, there are two tracks- while one is for projects approved under the Centre’s Semicon 2.0 programme, with State incentives over and above Central assistance, tthe other is for projects that have not applied or have not been selected for Central support.

There is up to 25 per cent State capital subsidy for major projects under Track 1 (those approved under Semicon 2.0). Track 2 offers fixed capital subsidies of 15–25 per cent of eligible fixed assets, along with turnover-based subsidies for specified categories.

Importantly, the scheme links incentives to local employment generation.

Projects under both tracks must ensure that at least 50 per cent of their direct workforce comprises Tamil Nadu residents, it notes. At least 60 per cent of high-value jobs, defined as positions with basic wages exceeding ₹25,000 a month, must also go to TN residents. Eligible projects will receive a payroll subsidy equivalent to 10 per cent of basic wages for qualifying local employees for 10 years.

Further, a special training incentive of ₹10,000 per person per month is available for 12 months, extended to 24 months for women, transgender employees, persons with benchmark disabilities and employees from Scheduled Caste and Scheduled Tribe communities.

The government has also proposed an additional capital subsidy for companies achieving at least 20 per cent localisation in their cost of goods sold.

Other benefits include concessions on land and stamp duty, 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.

Published on October 16, 2026

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