Telangana Industrial Policy: TS-iPASS, IT Parks & GCC Incentives

Why Telangana Has Become India's Fastest-Growing Investment Destination

Telangana has emerged as one of India's most competitive states for foreign direct investment. In fiscal year 2024-25, the state attracted over 70 new Global Capability Centres (GCCs) to Hyderabad alone, the highest in the country. With IT exports projected to cross INR 3 lakh crore and more than 355 GCCs employing over 300,000 professionals, the state now accounts for over 16% of India's total IT exports.

For foreign companies evaluating India entry, Telangana offers three distinct advantages that set it apart from competing states like Karnataka, Maharashtra, and Tamil Nadu: the TS-iPASS single-window clearance system that guarantees approvals within defined timelines, a comprehensive incentive framework covering capital subsidies, stamp duty reimbursement, and power tariff concessions, and purpose-built IT park infrastructure designed for immediate occupancy. This guide breaks down every policy, incentive, and compliance requirement a foreign company needs to navigate.

Understanding TS-iPASS: India's First Single-Window Clearance System

What Is TS-iPASS?

The Telangana State Industrial Project Approval and Self-Certification System (TS-iPASS) was enacted through Act No. 3 of 2014, making Telangana the first Indian state to guarantee time-bound industrial approvals by law. The system replaces the traditional multi-department approval process with a single online portal where foreign companies can apply for all required clearances simultaneously.

Under TS-iPASS, the state government guarantees approval within 15 days for units with investment up to INR 200 crore and within 30 days for larger investments. If the government fails to respond within the stipulated period, the application is deemed automatically approved through the self-certification mechanism. This is a legally binding commitment, not a policy guideline.

Approvals Covered Under TS-iPASS

The portal covers over 20 clearances that a foreign company would typically need, including:

• Water and power supply allocations
• Environmental clearances at the state level
• Building and construction permits
• Fire safety approvals
• Factory licence under the Factories Act
• Consent to establish and operate from the Pollution Control Board
• Labour registrations and shop establishment licences
• Land use conversion permissions

For wholly-owned subsidiaries of foreign companies, TS-iPASS eliminates the need to visit individual departments. The portal at ipass.telangana.gov.in allows electronic submission with digital signatures, and each application receives a unique tracking number.

How to Apply Through TS-iPASS

The step-by-step process for a foreign company is:

1. Company Registration: First, incorporate your private limited company or branch office through the MCA portal using SPICe+.
2. TS-iPASS Portal Registration: Create an account on ipass.telangana.gov.in with the company's CIN (Corporate Identification Number).
3. Application Submission: File the combined application form with project details, investment amount, employment generation targets, and land requirements.
4. Document Upload: Upload required documents including the Memorandum of Association, board resolution for India investment, FC-GPR filing receipt, and environmental impact assessment (if applicable).
5. Fee Payment: Pay processing fees online (typically INR 10,000 to INR 50,000 depending on project size).
6. Track and Receive: Monitor approval status online. Approvals are issued electronically with QR-code verification.

Industrial Incentives Framework: What Foreign Companies Can Claim

Capital Investment Subsidy

Telangana offers a capital investment subsidy of 25% on fixed capital investment (covering land, building, plant, and machinery) for MSME units, subject to a maximum of INR 30 lakh. For SC/ST entrepreneurs, the subsidy increases to 35% with a cap of INR 75 lakh. Large industries receive a 15% subsidy capped at INR 10 crore on fixed capital investment above INR 200 crore.

Stamp Duty and Registration Fee Reimbursement

The state provides 100% reimbursement of stamp duty, transfer duty, and registration fees on the first transaction of land or building purchase. On the second transaction, 50% reimbursement is available. This applies to sale deeds, lease deeds, mortgages, and hypothecations executed for the industrial unit.

Power Tariff Reimbursement

Industrial units are eligible for reimbursement of the fixed component of electricity charges for a period of 5 years from the date of commencement of commercial production. The reimbursement is INR 1.50 per unit consumed, which can translate to annual savings of INR 50-80 lakh for a mid-size manufacturing facility.

Land Cost Reimbursement

Units establishing in designated Industrial Estates (IEs) and Industrial Development Areas (IDAs) managed by TGIIC (Telangana State Industrial Infrastructure Corporation) can claim reimbursement of up to 50% of land cost, subject to a ceiling defined by the zone classification.

Interest Subsidy

An interest subsidy of 3% per annum on term loans from scheduled banks is available for 5 years from the date of commencement of production, subject to a maximum of INR 5 lakh per annum for MSME units.

Additional Incentives for Priority Sectors

IT & ITeS Policy 2021-2026: Incentives for Technology Companies

Overview of the ICT Policy Framework

The Telangana ICT Policy 2021-2026 sets an ambitious target of INR 3 lakh crore in IT/ITeS exports by 2026, with a focus on product development, engineering R&D, and cutting-edge innovation. For foreign technology companies, this policy framework offers some of the most aggressive incentives in India.

Land Cost Rebate Linked to Employment

IT companies receive land cost rebates directly proportional to the number of employees hired. A company hiring 500+ employees in the first three years can receive up to 100% land cost rebate in designated IT parks. Even smaller operations hiring 100+ employees qualify for 50% land cost rebate.

Power Cost Reimbursement for IT Units

IT and ITeS units receive power cost reimbursement of INR 2 per unit of electricity consumed for 5 years. For units established in Tier 2 locations (outside Hyderabad), the reimbursement increases to INR 3 per unit for 7 years, creating a significant cost advantage.

Stamp Duty Benefits for IT

100% reimbursement of stamp duty, transfer duty, and registration fees for IT companies on the first transaction. This applies to both land purchases and long-term lease agreements for office space in IT parks.

GRID Policy: Beyond Hyderabad Incentives

Telangana's GRID (Growth in Diversification) policy provides additional incentives for IT companies setting up operations outside Western Hyderabad. The state has built IT Towers with plug-and-play infrastructure in Warangal, Karimnagar, Khammam, and Mahabubnagar. Companies locating in these GRID zones receive:

• 25% additional capital subsidy on fixed investment
• 100% reimbursement of SGST for 7 years
• Additional power tariff concessions of INR 1 per unit
• Free plug-and-play workspace for the first 2 years (up to 10,000 sq ft)

Nearly 20,000 people are currently employed directly and indirectly in the IT Towers across Tier 2 cities, demonstrating that talent availability extends well beyond Hyderabad.

Setting Up a GCC in Telangana: The Complete Playbook

Why Hyderabad Dominates the GCC Landscape

Hyderabad is India's second-largest GCC hub with 355+ centres. The city witnessed 70 new GCC inaugurations in 2024-25 alone. Global giants including Amazon, Deloitte, JPMorgan Chase, Capgemini, and Cognizant operate GCCs here. The city's IT sector employs nearly one million professionals, generating approximately one-third of India's software exports.

Several factors make Hyderabad particularly attractive compared to Bangalore and Pune:

• Cost advantage: Office rentals in Hyderabad average INR 55-75 per sq ft per month, compared to INR 80-120 in Bangalore's prime corridors
• Talent pool: Over 900 engineering colleges in Telangana and neighbouring Andhra Pradesh produce 300,000+ graduates annually
• Infrastructure: Purpose-built IT corridors in Madhapur (100+ IT firms across 20+ business parks), Kondapur, Gachibowli, and Nanakramguda
• Government support: Guaranteed approvals within 15 days for GCC setups, dedicated single-point-of-contact officer for each foreign investment

GCC-Specific Policy Incentives

Telangana's targeted GCC policies, developed in collaboration with NASSCOM, offer:

• Plug-and-play infrastructure: Ready-to-occupy office spaces with IT infrastructure, power backup, and connectivity in designated IT parks and SEZs
• Streamlined labour regulations: Night shift permissions for women employees with safety provisions, flexible work hour policies supporting 24/7 operations
• Talent development partnerships: State-funded skilling programmes through T-Hub (India's largest technology incubator) and the Telangana Academy for Skill and Knowledge (TASK)
• Tax incentives in SEZs: Units in Special Economic Zones receive income tax exemption under Section 10AA and customs duty exemption on imports

Key IT Parks and SEZ Locations

Step-by-Step GCC Setup Process

1. Entity incorporation: Register a foreign subsidiary as a private limited company via SPICe+ (timeline: 7-10 days)
2. RBI compliance: File FC-GPR within 30 days of share allotment and obtain FLA Return certification
3. TS-iPASS registration: Apply for all state-level clearances through single window (timeline: 15 days)
4. Office setup: Lease space in IT park or SEZ, complete fit-out (timeline: 45-90 days for plug-and-play; 120-180 days for custom build-out)
5. GST registration: Apply for GST registration in Telangana (timeline: 7-15 days)
6. Hiring: Begin recruitment leveraging TASK partnerships and campus placement drives
7. Incentive claims: File applications for applicable subsidies through TS-iPASS portal within 1 year of commencement

FEMA and RBI Compliance for Foreign Investors in Telangana

Foreign companies investing in Telangana must comply with FEMA regulations regardless of state-level facilitation. The key compliance requirements include:

• FDI route: Most IT and manufacturing sectors are under the automatic route for 100% FDI. No RBI or government approval is needed for investment in IT/ITeS, most manufacturing, and business services.
• FC-GPR filing: Must be filed within 30 days of share allotment to report foreign investment inflow.
• Annual FLA Return: Required by July 15 each year, reporting total foreign investment in the Indian entity.
• Transfer pricing: Intercompany transactions between the GCC and its parent must comply with transfer pricing regulations under Section 92 of the Income Tax Act. Cost-plus models used by most GCCs require documented benchmarking.
• Repatriation: Profits, dividends, and royalties can be freely repatriated after payment of applicable withholding tax and TDS under Section 195.

How Telangana Compares to Competing States

When evaluating which Indian state to choose, foreign companies should consider these comparative factors:

Tax Benefits and SEZ Advantages in Telangana

Special Economic Zones (SEZ) Tax Benefits

Telangana hosts over 30 operational SEZs, many concentrated in the Hyderabad IT corridor. Units in SEZs enjoy significant tax benefits under Section 10AA of the Income Tax Act:

• Income tax exemption: 100% exemption on export profits for the first 5 years, 50% for the next 5 years, and 50% of ploughed-back profits for the subsequent 5 years
• Customs duty exemption: Duty-free import of capital goods, raw materials, and consumables
• GST exemption: Supplies to SEZ units are zero-rated under GST, meaning no GST is payable on goods and services procured for authorised operations
• Stamp duty exemption: Many SEZ developers offer stamp duty exemption on lease agreements within the zone

Corporate Tax Considerations

Foreign companies establishing manufacturing operations can opt for the concessional corporate tax rate of 15% (plus surcharge and cess, effective rate approximately 17.16%) under Section 115BAB, provided the company is incorporated after October 1, 2019 and commences manufacturing by March 31, 2024. For IT companies, the standard corporate tax rate of 25.17% (for turnover up to INR 400 crore) or 30% applies.

R&D Tax Incentives

Companies engaged in in-house R&D can claim weighted deduction of 100% on R&D expenditure under Section 35(2AB). For GCCs performing engineering R&D, this can provide substantial tax savings. The Telangana government additionally supports R&D through the Telangana AI Mission (T-AIM) and the state's innovation fund.

Labour Laws and Hiring Considerations

Employment Regulations

Telangana follows central labour laws with some state-specific modifications. Key considerations for foreign companies:

• Shops and Establishments Act: All commercial establishments must register under the Telangana Shops and Establishments Act within 30 days of commencing business
• Contract Labour: Engagement of 20+ contract workers requires registration under the Contract Labour (Regulation and Abolition) Act. GCCs hiring through staffing agencies must ensure the agency holds a valid licence
• Provident Fund: Mandatory EPF contribution of 12% each from employer and employee for establishments with 20+ employees
• ESIC: Employee State Insurance contribution applies for employees earning up to INR 21,000 per month

Talent Availability and Cost

Telangana and neighbouring Andhra Pradesh have over 900 engineering colleges producing 300,000+ graduates annually. Average starting salaries for IT professionals in Hyderabad:

These salary ranges are 15-25% lower than equivalent roles in Bangalore, providing a sustained cost advantage for GCC operations. The Telangana Academy for Skill and Knowledge (TASK) offers customised training programmes that foreign companies can leverage for free or at subsidised rates.

Real Estate and Infrastructure for Foreign Companies

Office Space Options

Foreign companies in Telangana have three primary real estate models:

• Managed office spaces: Fully furnished, plug-and-play offices available from providers like WeWork, Regus, and local operators like iSprout. Ideal for initial setup while evaluating long-term requirements. Cost: INR 12,000-18,000 per seat per month.
• Leased bare-shell in IT parks: Long-term leases (typically 5-9 years with escalation clauses of 5-15% every 3 years) in established IT parks. Requires fit-out investment of INR 2,500-4,000 per sq ft. Cost: INR 55-95 per sq ft per month.
• Built-to-suit campuses: For large operations (1,000+ employees), TGIIC and private developers offer built-to-suit options on government-allocated land. Timeline: 18-24 months from agreement to occupancy.

Connectivity and Infrastructure

Hyderabad's Rajiv Gandhi International Airport connects directly to major cities including Tokyo (via connecting flights), London, Singapore, Dubai, and all major Indian metros. The city's metro rail system (46 km operational) connects IT corridors to residential and commercial areas. The Outer Ring Road (158 km) provides seamless connectivity between industrial zones.

For manufacturing units, the state offers dedicated freight corridors and proximity to Krishnapatnam and Machilipatnam ports for export-oriented operations.

Common Mistakes Foreign Companies Make in Telangana

Based on our experience advising foreign companies on Telangana setups, these are the most frequent errors:

• Missing incentive claim deadlines: Most subsidies must be claimed within 1 year of commencement. Companies that get absorbed in operations and miss the window lose significant benefits permanently.
• Not using TS-iPASS for all clearances: Some foreign companies still approach individual departments out of habit. This leads to delays of 3-6 months versus the 15-day TS-iPASS timeline.
• Underestimating compliance overlap: State incentives do not exempt you from central government compliance. FEMA/RBI filings, annual ROC compliance, and income tax obligations run in parallel.
• Choosing the wrong zone: Companies that set up in prime Western Hyderabad miss the significantly higher incentives available in GRID locations. For cost-sensitive operations, Tier 2 locations can reduce total cost of operations by 25-35%.
• Ignoring the resident director requirement: Every Indian company must have at least one director who has stayed in India for at least 182 days during the financial year. Foreign companies often discover this requirement late, causing board composition issues.

Key Takeaways

• TS-iPASS provides legally mandated 15-day approvals for investments up to INR 200 crore, with automatic deemed-approval if the timeline is breached.
• Total incentive value for a mid-size foreign manufacturing unit (INR 50-200 crore investment) can reach INR 5-15 crore through combined capital subsidy, stamp duty reimbursement, and power tariff benefits.
• Hyderabad's 355+ GCCs and IT exports exceeding INR 3 lakh crore make it India's second-largest technology hub, with office rentals 25-40% lower than Bangalore.
• The GRID policy provides an additional 25% incentive uplift for companies willing to locate in Tier 2 cities like Warangal and Karimnagar.
• Foreign companies must run state incentive claims in parallel with central FDI compliance, including FC-GPR, FLA returns, and transfer pricing documentation.