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India By State - Tamil Nadu - Taxation & Legalities

Taxation & Legalities

Policies & Incentives

Tamil Nadu wants to create an investment friendly climate with harmonious rules and good relationships to consolidate the bases and develop manufacturing capabilities (skill development centres, business and financial centres, housing centres, restaurants, schools and hospitals).

The Government gives priority to SEZs. The State focuses on:

  • Achieving a growth rate of 8 percent
  • Formulating new strategies to boost FDI and to enhance the manufacturing capacity
  • Strengthening the existing industrial base and consolidating gains in the competitive domestic and export markets
  • Developing infrastructure by establishing strategic public-private partnerships

Established in 1965 as a Government of Tamil Nadu Enterprise to promote Large and medium scale industries in Tamil Nadu.

Infrastructure Policy

The State Government wish to attract investors in making Tamil Nadu an interesting place.

For achieving that, the policy encouraged the participation of private players in the infrastructural development. As per the provisions laid down under the policy, the government established an 'Infrastructure Fund' has been set up in order to facilitate public-private partnerships in this sector. The fund has been endowed with an initial corpus of US$ 4.1 million and will finance a number of infrastructure development initiatives. Reaching out by facilitating business Tamil Nadu has been able to attract a significant portion of the total FDI inflow in the country.

The main initiatives are:

  • Custom made packages for investment in fixed assets
  • Capital subsidies and exemption in Electricity Tax to companies investing in fixed assets.
  • Exemption from entry and sales tax on imports of manufacturing units
  • Greater Subsidy for newly established industrial units located in government industrial parks
  • Grant of incentives for registration of patents through one-time reimbursement

SEZs policy

The government has laid down guidelines regarding the Special Economic Zones (SEZs) in its policy as per which the state envisages to provide legislative support to the SEZs. It also aims to ensure that the supply of power and water to these SEZs is adequate and also that single window clearance system is implemented with respect to all the SEZ units.

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IT Policy

As far as the IT infrastructure is concerned, there are over 1400 companies employing more than 145,000 professionals. Next to Bangalore, Chennai ranks second in terms of the software exports in India. It is one of the initial states in India to come up with their IT policy. It is one of the first states to formulate a comprehensive policy for laying high bandwidth optic fibre cables throughout the state. Software companies (including services and training) in Tamil Nadu are assured of uninterrupted power supply, and exempted from Pollution Control regulations, Factories Act and certain provisions of the Tamil Nadu Shops & Establishment Act. Government of Tamil Nadu promoted Information Technology Park - the TIDEL Park to boost the development of the Information Technology Corridor of Chennai.

Companies such as HCL, Wipro, TCS, Infosys, Convergys, Ford Information Technology, Xansa, iSoft have their offices in Chennai. Infosys Technologies has set up India's largest software development centre to house 25,000 professionals at an estimated investment of $270 million in Chennai. The main guidelines as specified in the ITES Policy of the state are:

  • To create Biotechnology Enterprise Zones (Bio-Valleys)
  • To build human resources in the biotech sector
  • To create technology fund for biotechnology sector
  • To establish Tamil Nadu Biotechnology Board
  • To regulate facilitation for establishing a Biotech entity for commencing research activity

Textiles Policy 2006-07

The state government wants to bring about the best quality to meet global standards. The policy aims to give thrust to exports and encourage textile clusters. As per the policy, the state is laying emphasis on:

  • Enhancing the quantity and quality of textiles and meet the needs of both domestic as well as overseas market, taking into consideration the industry's potential for employment
  • Identifying markets, products for each market, inputs required, technology, human and financial resources required to meet the growth in the industry.

Tourism Policy

The tourism department of Tamil Nadu has come out with its tourism policy with the aim to retain the tourists for a longer period, attract new tourists and to make systematic effort to upgrade the infrastructural facilities.

The key guidelines outlined in the policy are:

  • To participate in International Travel Marts to attract tourists
  • To promote rural tourism
  • To select certain tourism destinations and improve their infrastructure
  • To develop Eco-Tourism circuit
  • To establish sculptors park for sculptors and artisans in Mamallapuram.
  • To introduce "Hop on - Hop off" tours in Chennai

Biotech Policy

The State Government wants to provide modern processes with traditional biotechnology products, especially in the area of Industrial and food enzymes. Focus on Medical / Human & Animal Healthcare, Agriculture-food, Environment, and Industrial Products

  • Creation of Biotechnology Enterprise Zones (Bio-Valleys) Regulatory facilitation for establishing a Biotech entity for commencing research activity
  • Strengthening of Human Resources Pool
  • Establishment of Emerging Technologies fund for biotechnology
  • Establishment of Tamil Nadu Biotechnology Board

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Doing Business in Tamil Nadu

An indicative list of approvals with timeframe for setting up business in Tamil Nadu

List of approvals and clearances required

Departments to be consulted

Incorporation of the company Registrar of companies
Registration, IEM, Industrial licences District Industry Centre
Allotment of land State Department of Industries / State Industrial Development Corporation / Infrastructure Corporation
Permission for land use State DI, Department of Town and Country Planning
Site environmental approval State pollution control board and Ministry of environment and forests
No Objection Certificate and consent underwater and pollution control Acts State pollution control board
Approval of construction activity and building plan Town and country planning authority
Sanction of power State electricity board
Registration under states sales tax act and central and state excise act Sales tax department, Central and state excise departments

Estimated time Taken (days)

Single Window Clearance
GUIDANCE (state's single window clearance facility) clears investment proposals in 30 days on an average. The single window obtains all approvals necessary for the investment proposal within the aforementioned time*.

*Source: Guidance Export and Promotion Bureau

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Cost of setting up business

An indicative table on cost of setting up business in Tamil Nadu


Land (US$ / hectare)* 75,235
Labour Cost (US$ / man year)** 1,362

Employee Cost (US$ / man year)****

Occupation Costs*** (US$ / sq ft / year) 14.68

Common Heads

Software Developers 6,383
Team Leads 14,893
Architects 21,276.5
Project Managers 32,209


Cost of capital***** (Prime lending rate, per cent) 10.6

Electricity (US cents/ kWh)******

Metropolitan Area 7.05
Non Metro Area 6.85

Sales Tax exemptions: For large investment, on a case-to-case basis, the Government of Tamil Nadu gives sales tax waiver/deferral for duration up to 7 years. Specific commodity sales tax rates are available at

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More Information on Tamil Nadu

Back to interactive India state map

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