Animation, gaming, VFX, entertainment and allied industries are the emerging verticals in the ICT sector. Globally, these verticals have been in focus in the recent past and are believed to have a significant share in the ICT and entertainment industry in the future. Telangana was the first state to have a dedicated AVGC Policy called the IMAGE Policy (2016).
Telangana government’s second ICT policy (2021) states that the target of doubling the quantum of IT exports in five years in their ICT policy 2016-21 have been successfully achieved. It is one of the first states that adopted technologies in newer spheres of the public interface and is presently recognised as a pioneer in various domains of technology like AI, ML, blockchain, data analytics, cybersecurity, IMAGE (Innovation in Multimedia Animation Gaming and Entertainment), drones, etc.
Telangana’s second ICT policy also highlights how the state has extensively focused on developing its base in the gaming, animation, VFX, computer vision, and AI startups. The state has collaborated with the central government and established the IMAGE CoE to further the development in this sector. Through its accelerator program, IMAGE CoE is supporting startups with mentorship, funding and training programs. The upcoming IMAGE Tower is an incubator that is a flagship initiative to establish Telangana as the go to destination for startups in the IMAGE space boasting a built-up area of 16,00,000 sqft.
The IMAGE Tower that will cater to the animation, visual effects, gaming & comics (AVGC) sector, is being built along the IT corridor of Hyderabad, HITEC City. Various news reports state that the project got delayed during the pandemic and the construction is very likely to be completed by the end of 2024. The IMAGE policy had earlier mentioned that the state of Telangana shall make every effort to attract reputed animation, visual effects, gaming & comics companies and training academies/universities of international repute to set up their operations in the state.
The IMAGE CoE has been conducting an ‘Accelerator program’ for startups. They are currently inviting applications for their fifth cohort, designed exclusively for startups in gaming, animation, VFX, AI, and computer vision. This will open the door for selected startups to enjoy upto Rs 35 lakh seed fund, plug & play infrastructure with up to five seats, access to the upcoming IMAGE motion capture lab and much more.
The government officials had clearly outlined certain fiscal incentives for the promotion of the sector, besides strengthening training, creating awareness and making efforts to further enhance the start-up ecosystem in the state.
To read the whole policy report click here: IMAGE Policy 2016.
The following fiscal incentives are available in Telangana:
Capital investment subsidy: 25 per cent capital investment subsidy limited to Rs 25 lakhs for fresh investments made post declaration of the said policy. This is a one-time subsidy for an investment of above Rs 5 crore and creating new employment of 50 employees and above (subject to the company being in operation for the last two financial years).
Reimbursement of production cost (animation films): 20 per cent cash back of the project cost if 80 per cent of the production cost of that project is incurred in Telangana by using Telangana talent. This incentive is applicable to animation companies that have produced animation films (90 minutes & above) – ‘Animation Theatrical Released film’. The total reimbursement will be up to a maximum of Rs 10 lakhs per film for one company, per annum, if produced on their own and marketed in their brand name. The allowable production costs are manpower cost, materials & print and professional services.
Reimbursement of production cost (animation cartoon series): 20 per cent cash back of the project cost if 80 per cent of the production cost of that project is incurred in Telangana by using Telangana talent. This incentive is applicable to animation companies that have produced ‘Animation Cartoon Series’ (25 episodes & above) for TV and telecast on TV channels. The total reimbursement will be up to a maximum of INR 5 lakhs per series for one company per annum if produced on their own and marketed in their brand name. The allowable production costs are manpower cost, materials and print and professional services.
Reimbursement of Game production cost: 20 per cent cash back of the project cost if 80 per cent of the production cost of that project is incurred in Telangana by using Telangana talent. This incentive is applicable to gaming companies which have developed online, mobile, console games. The total reimbursement will be up to a maximum of Rs 5 lakhs per game for one company per annum if produced on their own and marketed in their brand name. The allowable production costs are manpower cost, materials & print and professional services. Units / companies to be eligible for said incentives should showcase two lakhs collective downloads on iOS, Google Play or windows or the game should be award winning / nominated at national / international repute gaming conclaves.
Subsidy on lease rentals: 25 per cent subsidy on lease rentals up to Rs 5 lakhs per annum (maximum) up to a period of three years, for built up office space of up to 25,000 sq ft. leased by AVGC companies. Eligibility as per operational guidelines.
Reimbursement of duties: 100 per cent reimbursement of stamp duty, transfer duty and registration fee paid by AVGC companies on sale / lease deeds on the first transaction.
This incentive is available for mega projects also. This incentive is not available in case government land is allotted.
Reimbursement of levies: 50 per cent reimbursement of stamp duty, transfer duty and registration fee paid by AVGC companies on sale / lease deeds on the second transaction.
This incentive is available for mega projects also. This incentive is not available in case government land is allotted.
Power category: Admissibility of Industrial Power category tariff for AVGC companies. This incentive is eligible for mega projects. Additionally, AVCGI company will be permitted to avail renewable energy under open access system after paying a nominal fixed cost component to DISCOMs as fixed by ERC, subject to a maximum of one third of their total power requirements.
Recruitment assistance: Rs 15 lakhs as recruitment assistance for employing a minimum of 100 employees within two years of commencement of commercial operations payable on telescopic method @ Rs 7.5 lakhs in the first one year for employing 50 employees and the balance of INR 7.5 lakhs in the second year for employing 50 more employees. For the purpose of calculation, 50 per cent of the employees recruited should be of Telangana origin.
Entertainment Tax exemption: Full-fledged animation VFX theater film produced and released in Telangana will be entitled for ‘Entertainment Tax exemption’. This incentive is available for mega projects also.
Reimbursement of quality certification costs: Reimbursement of 20 per cent of expenditure incurred for obtaining quality certification such as ISO, Indian & International Patent, Conformity European (CE), China, Compulsory Certificate (CCC) and industry specific certifications as per AVGC Standards as recommended by AVCGI Industry Association / CCAGI. Reimbursement will be limited to a maximum of Rs 4 lakhs.
Reimbursement of exhibition rentals: 50 per cent exhibition stall rental cost limited to nine sq.mts. of space and delegate registration charges at conferences / exhibitions will be reimbursed for participating in the notified national / international exhibitions specifically for AVGC conferences and exhibitions. This incentive is up to a maximum amount of Rs 5 lakhs per annum for participation in single or multiple events.
Reimbursement of Internet Bandwidth charges: Up to Rs 2 lakhs per annum for a period of three years (multiple locations within Telangana under single company name) will be reimbursed. The reimbursement is based on actual usage of Internet connectivity charges paid to an Internet Service Provider (ISP).
Mega Project incentives: Special incentives and subsidies packages will be worked out for mega projects and projects of strategic importance.
IMAGE Policy mentioned a separate section on fiscal incentives for SC/ST and women entrepreneurs. They are:
Capital investment subsidy: 25 per cent capital investment subsidy limited to Rs 35 lakhs for fresh investments made post declaration of the said policy. This is a one-time subsidy for an investment above Rs 5 crores and to create new employment of 50 employees and above (subject to the company being in operation for the last two financial years).
Reimbursement of production cost for animation theatrical released film: 40 per cent cash back of the project cost if 80 per cent of the production cost of that project is incurred in Telangana by using Telangana talent, as compared to the incentive mentioned in the above section. The other conditions remain the same. This incentive is limited to a maximum of INR 15 lakhs per film company per annum.
Reimbursement of production cost for animation series: 40 per cent cash back of the project cost if 80 per cent of the production cost of that project is incurred in Telangana by using Telangana talent, as compared to the incentive mentioned in the above section. The other conditions remain the same. This incentive is limited to Rs 10 lakhs per series per company per annum.
Reimbursement of game production cost: 40 per cent cash back of the project cost if 80 per cent of the production cost of that project is incurred in Telangana by using Telangana talent, as compared to the incentive mentioned in the above section. The other conditions remain the same. This incentive is limited to Rs 10 lakhs per game per company per annum.
Subsidy on lease rentals: 50 per cent subsidy on lease rentals up to Rs 8 lakhs per annum maximum, up to a period of three years for built up office space of up to 25,000 sq ft. leased by AVGC companies. Eligibility as per operational guidelines.
Reimbursement of duties: 100 per cent reimbursement of stamp duty, transfer duty and registration fee paid by AVGC companies on sale/ lease deeds on the first transaction. This incentive is available for mega projects also. This incentive is not available in case government land is allotted.
Reimbursement of levies: 75 per cent reimbursement of stamp duty, transfer duty and registration fee paid by AVGC companies on sale/ lease deeds on the second transaction. This incentive is available for mega projects also. This incentive is not available in case government land is allotted.
Industrial Power category: Admissibility of Industrial Power category tariff for AVGC companies. This incentive is eligible for mega projects also. Additionally, AVCGI companies will be permitted to avail renewable energy under open access system after paying a nominal fixed cost component to DISCOMs as fixed by ERC, subject to a maximum of one third of their total power requirements.
Recruitment assistance: Rs 15 Lakhs as recruitment assistance for employing minimum of 100 employees within two years of commencement of commercial operations payable on telescopic method @ Rs 7.5 lakhs in the first one year for employing 50 employees and balance of Rs 7.5 lakhs in the second year for employing 50 more employees. For the purpose of calculation, 50 per cent of the employees recruited should be of Telangana origin.
Entertainment Tax Exemption: Full-fledged animation VFX Theater film produced and released in Telangana will be entitled for Entertainment Tax exemption. This incentive is available for mega projects also.
Quality certification expenditure: Reimbursement of 40 per cent of expenditure incurred for obtaining quality certifications such as ISO, Indian & International Patents and industry specific certifications as per AVGC standards as recommended by AVCGI Industry Association / CCAGI. Reimbursement will be limited to a maximum of Rs 5 lakhs.
Exhibition rentals: 100 per cent exhibition stall rental cost limited to nine sq.mts. of space and delegate registration charges at conferences / exhibitions will be reimbursed for participating in the notified national / international exhibitions specifically for AVGC conferences and exhibitions. This incentive is up to a maximum amount of Rs 10 lakhs per annum for participation in single or multiple events.
Internet bandwidth charges: Reimbursement of internet bandwidth charges up to Rs 3 lakhs per annum for a period of three years, as compared to Rs 2 Lakhs mentioned in the above section.
By focusing on infrastructure development, support for startups and SMEs, collaboration with industry leaders, and talent development, the government of Telangana has created a thriving ecosystem for AVGC activities in the state.
To read the whole policy report click here: IMAGE Policy 2016.