Subsidies and Incentives for Software, IT and IT-Enabled Service Businesses — PMEGP for a Software Proprietorship (15–35% on a Project up to ₹20 Lakh), 50% Support on Software and Technology Purchases Under Rajasthan's ODOP Policy, RIPS 2024 for IT Units, MSME Innovative Reimbursement of Patent and Trademark Costs, Startup India Grants and Fund of Funds, STPI and SEZ Benefits for Exporters, Zero-Rated GST Exports, and What Does Not Exist
15–35%
PMEGP margin money on a software/IT service project up to ₹20 lakh — proprietorship or SHG only
50% / ₹5 L
Rajasthan ODOP Policy 2024 support on technology and software acquisition for eligible units
₹20 L + ₹50 L
Startup India Seed Fund — grant for validation and convertible/debt for scaling, through incubators
0% GST
Export of software/IT services under LUT with refund of input credit; SOFTEX for STPI/SEZ units
Guide by BookMyCA's Chartered Accountants · pan-India serviceLast verified against official guidelines on 7 September 2026.
Video Explanation & Insights
Subsidy for the software industry — PMEGP for software startups
4 videos on this topic
What exists — and what does not
| Support | Who | What it gives | Notes |
|---|---|---|---|
| PMEGP | Individual (proprietorship) or SHG starting a new IT/software/BPO unit; 8th pass above ₹5 lakh | Margin money 15% urban / 25% rural (general), 25% / 35% (women, SC/ST/OBC, minorities, PwD, NER etc.) on a project up to ₹20 lakh (service) | A private limited company, LLP or partnership is not eligible — the video's point; convert later |
| State technology/software support | MSMEs under state policies — Rajasthan ODOP Policy 2024 (units in the district's ODOP product), RIPS 2024 IT/ITES incentives; MP, Gujarat, Karnataka and others have similar heads | Rajasthan ODOP: 50% of the cost of technology/software up to ₹5 lakh, with Udyam and a chartered engineer's certificate; RIPS: IT units get the MSME/thrust-sector package (capital/interest subsidy, SGST reimbursement, employment booster) | The 2019 'Tally subsidy' videos referred to such state heads; there is no central subsidy on buying accounting software |
| MSME Innovative (IPR) | Udyam-registered MSMEs | Reimbursement of patent costs (up to ₹5 lakh foreign, ₹1 lakh domestic), GI, design and trademark registration costs | Claim after grant/registration |
| Startup India | DPIIT-recognised startups (up to 10 years, turnover under ₹100 crore, innovative) | Seed Fund Scheme via incubators (grant up to ₹20 lakh, convertible/debt up to ₹50 lakh), Fund of Funds through SEBI AIFs, 3-year tax holiday under 80-IAC (incorporation window extended to 1 April 2030), angel-tax relief, self-certification, IPR fast-track with 80% patent fee rebate | Recognition is the gate; see our startup grants section |
| CGTMSE / Mudra | IT service MSEs | Collateral-free loans (Mudra up to ₹20 lakh; CGTMSE cover up to ₹10 crore) | Loans, not subsidies |
| STPI / SEZ | Software exporters | STPI: single-window, SOFTEX, duty-free imports of capital goods for the unit; SEZ units: duty-free imports, GST-free procurement, (income-tax holiday ended for new units after 2020) | Compliance-heavy; suits units with meaningful exports |
| GST on exports | Any exporter of services | Zero-rated under LUT; refund of ITC on laptops, cloud, software subscriptions | Needs FIRA/e-BRC trail; SOFTEX for STPI/SEZ units |
| Not available | — | Cash subsidy on buying Tally/ERP from the centre; 'IT subsidy' for a company under PMEGP; SEIS (closed after 2019-20) | Beware of consultants selling these |
The stack for a new software business — in order
- 1Entity choice with the subsidy in mind: a founder who wants PMEGP starts as a proprietorship (or the co-founders each run one for separate units), takes the loan and the margin money, and incorporates after the 3-year lock-in; a founder raising equity incorporates a private limited company and forgoes PMEGP for Startup India.
- 2Udyam registration (service, micro) — the gate for MSME Innovative, state supports, CGTMSE and the 45-day payment protection under section 43B(h).
- 3DPIIT recognition for innovative startups; apply to an incubator under the Seed Fund Scheme; consider 80-IAC certification for the tax holiday.
- 4Loan: PMEGP through the KVIC portal (project ≤ ₹20 lakh) or a Mudra/CGTMSE-covered loan; the project report should show laptops, servers, software licences, fit-out and working capital with capex at 60% or more.
- 5State support: file for technology/software support under the applicable state policy after the Udyam and the purchase; RIPS-type packages need the eligibility certificate before commercial operations.
- 6Exports: LUT before the first foreign invoice; FIRA from the bank/Payoneer; SOFTEX if STPI/SEZ-registered; claim ITC refunds quarterly.
- 7IPR: file trademarks and, where there is an invention, patents — then claim the MSME Innovative reimbursement.
IT subsidies: questions we are asked
No — PMEGP is for proprietors, SHGs, trusts and societies. Use Startup India (Seed Fund, 80-IAC) and CGTMSE-backed loans instead.
Not from the centre. Some state MSME policies reimburse part of technology/software costs for eligible units (Rajasthan ODOP: 50% up to ₹5 lakh) — check the live policy.
Yes as a proprietorship for a new unit up to a ₹20 lakh project; the working-capital share must be within 40%.
Through incubators: grants up to ₹20 lakh and convertible/debt up to ₹50 lakh under the Seed Fund; Fund of Funds invests via AIFs; plus the tax holiday and fee rebates.
Only for STPI/SEZ-registered units; other exporters rely on invoices and FIRA/e-BRC for GST refunds and RBI reporting.
Yes — entity structuring, Udyam and DPIIT, PMEGP or loan filing, state support claims, LUT/refunds and IPR reimbursements.